Electric Farm Hopes Must-See Internet Will Bring In Ad Dollars

INSIGHT: In its short but eventful life, the internet has turned many a maxim on its head. Consider this one: you get what you pay for. If that's true, the web would have died some five years ago, because the typical user would prefer not to pay for a thing. Advertising straddles the compromise line - costly to marketers, but free to consumers. So the trick in this scenario is finding the sponsors. That's Electric Farm's plan for its sci-fi series Afterworld. Produce a quality program, and the ad dollars will follow. Episodes have begun to show up on YouTube, but the money should come from the show's website. A curious strategy. Plus the flash animation hardly bespeaks top-of-the-line quality. However, when the shows move to the website, interaction and games should appear along with them. And that could change the experience dramatically.

Red Herring: May 3, 2007
By Alexandra Berzon

YouTube's Commercial Audition

It will be hard to miss Afterworld, a new animated show featuring a cell phone salesman who makes a long, lonely trek home after all technology fails in a post-apocalyptic world. Story producer Stan Rogow calls it a "lyrical and poignant and dramatic and emotional" show-not exactly the type of fare viewers have come to expect on one of the Internet's most popular websites.

But that is exactly where they will find Afterworld, now showing in ten "preview" episodes on video-sharing site YouTube. The serial officially launches on its home site in mid-May and will soon thereafter be available on various other websites. In contrast to the many grainy, humorous and often trashy videos that populate YouTube, Afterworld's big budget and richly drawn story make it one of the most ambitious attempts yet to program for the web.

And with ambitions of tapping the Internet video advertising market, the producers of Afterworld will also provide Google-owned YouTube with its first real chance to demonstrate its revenue generating potential-just as the site gears up to roll out video commercials this summer.

"This will be one of the early tests to see if they can scale the advertising to these kinds of audiences," said Gartner analyst Mike McGuire.

There is plenty of doubt whether Internet viewers are ready for commercials, but that hasn't stopped producers at Electric Farm, the Internet production house behind Afterworld. They are pouring millions of dollars into the show in hopes of creating a compelling web serial that will attract the Internet digerati and advertisers.

"Most producers are using the Internet as a little laboratory," said Mr. Rogow, who produced the Lizzy McGuire television and movie franchise. "We're not. We wanted to make a statement that we're a company that believes there's a business to be made out making shows principally on the Internet."

Like other Internet production companies, Electric Farm plans to distribute the show through many Internet sites, including video portals YouTube and BudTV. It is also hoping to sign on MySpace, MSN and others before the show sees its official launch. The company began showing ten "preview" episodes several weeks ago. .

But there's a key twist. Other professional web producers, such as Prom Queen's Michael Eisner, pre-inserted ads into shows before they were distributed across the Internet. Electric Farm, on the other hand, is counting on video portals, including YouTube, to sell ads and share revenues.

"We think becoming partners with portals the size of YouTube, their ability to leverage those deals is pretty significant, and the opportunity to value it is better," said Mr. Rogow.

Electric Farm's timing could make it the breakthrough commercial hit on the Internet. YouTube representatives said last week that the site plans to start rolling out video commercials by this summer.

No one knows exactly how Google plans to structure its YouTube business, but Susquehanna analyst Marianne Wolk recently wrote in a research note that she expected the site to split ad revenues evenly with content creators.

She estimated that YouTube could generate $72 million in revenue in 2007, rising to $300 million in 2008. Video advertising across the entire Internet could become a $3 billion business by 2010, according to research group emarketer.

It all sounds so promising, but there is really no way to know for sure how viewers and advertisers will respond to Afterworld or YouTube's advertising plans. Internet users have proven to be a fickle lot who are quick to move to new sites when popular ones lose their edge. A Harris Interactive poll released earlier this year indicated that nearly three-quarters of YouTube watchers would be less likely to tune in if they had to view commercials.

But don't worry about Electric Farm. It has the mother of all back up plans-a seven-figure deal with Sony Television's international arm to create an Afterworld franchise for international web portals, as well as mobile, computer, and console games. It could even end up showing on television, and at the movies. Sony Television International's head of programming and production, Marie Jacobson, compares Afterworld potential to that of its Spiderman franchise.

Still, the Gang at Electric Farm have hung on to Internet distribution rights in the U.S., and they have high hopes for YouTube and other video portals. Internet users have long grown accustomed to free and commercial-free content, but Mr. Rogow believes those viewers can be converted by compelling storytelling and quality animation.

After all, the premise-that quality sells-is not so far-fetched, even on YouTube.

"The challenge is creating something that resonates, and not just because it's delivered differently," said Gartner's Mr. McGuire. "It's more important to invest in the art, to create content that can sustain an audience. Otherwise advertisers don't care."