On September 5th reports circulated the IPTV startup Joost was preparing to abandon their application-based delivery mechanism in favor a new, more accessible browser based solution. The new launch was promised shortly. Today, it arrived.
At the Joost website, the company began serving a browser based solution to stream its collected library of licensed video content. The launch was characterized as “soft” meaning the company is not promoting it and is using it as a live beta test to work out bugs.
To run, the new Joost requires a browser with an Adobe Flash plug-in (which is most browsers in use). Using Joost also requires the installation of a custom plug-in. Some reports are saying, within a month, this custom plug-in will no longer be needed. (That’s not yet confirmed). For now, that’s not the case and the plug-in also stays active in the background even if you are not at the Joost site. Presumably its handling the peer to peer aspect of their delivery.
(To remove the plug-in, though browser based, you’ll have to uninstall via the start menu on a windows computer. Disabling the plug-in in the browser doesn’t remove it)
As a beta, some bugs were to be expected but the browser access was certainly an improvement over standalone software. Even with more social interaction features, the interface, a strong point in the original application, remained clean and easy to navigate. Speed and image quality depend on individual connection speeds but seemed decent too– assuming the browser didn’t crash (which it did on a few test runs).
All in all, in light testing, it seems like a promising offering. The lingering question is however – does it matter. Even re-invented as a browser-based service, does Joost have a chance to be relevant, a chance to win audience and gain traction or is it too little too late?
The Relevance Debate
In May 2007, Joost was a hotly hyped peer to peer video platform still in an invitation only beta. The founders were coming off of huge success in the creation and sale of Skype. Expectations were high. Further fueling them, the company raised an unheard of $45 million in its first financing. The money came from noted investors in Asia, Europe and America. The prospects, many thought, were very good. But things change fast in the Internet world.
Joost’s May financing predated the launch of NBC Universal and News Corp’s Hulu, it almost predated Move Network’s seamless distribution technology winning big partners (they signed ABC in April ’07), it predated Adobe’s Flash (the most prevalent video standard) getting upgraded and gaining HD capability.
Today, in September 2008, the landscape is notably different. For those early adopting consumers itching for an internet source of quality content, we can now get volumes of video content legally, on-demand through the computer. We can watch premiers from NBC at Hulu before they are even broadcast on the TV network. We can order on demand programs from Amazon, or watch streamed videos bridged straight to the TV with Netflix watch now. There’s the Xbox Live platform, Apple TV and a host of others. There’s also YouTube, Veoh, and a cacophony of smaller niche video providers. There are more choices than consumers know what to do with.
So Joost through the browser? Relevant or another fish in a crowded sea?
As far as forecasts go, prior coverage on Metue characterized the prospects for IPTV companies as challenging. At this point, there’s little new to justify reconsidering that position. The September 5th report quoted April coverage, which in turn borrowed from the first Metue coverage of Joost from January 2007. The impressions remain true to the letter. In January 2007, the first Metue report said:
The previously code named “Venice Project” was recently unveiled as such an application for streaming television content. Skype founders, Niklas Zennström and Janus Friis, began the project with some of the proceeds following the sale of Skype to EBay for more than $2.5b in 2005.
The new company, Joost (pronounced "juiced"), is set to allow consumers to watch ad-supported TV online through a downloaded software client. The underlying architecture is reported to be based on similar peer to peer structures to those the two previously developed for Skype.
The Joost application is still in beta tests. I haven’t seen it, nor have I read test reports from anyone unaffiliated to the company that has. My initial gut reaction (appropriately disclaimed based on the limited info so far available) is that the company, while being a good example of technology and media converging, will not likely be the maker of the next new killer app.
There are just too many ways to distribute content and build scalable architecture to support it. Even if peer to peer proves brilliantly cost effective and efficient, Joost won’t be the sole player to apply it. In fact, they’re not even the first notable company to try it. Veoh, a San Diego based start-up backed by ex-Disney Chief Michael Eisner has been in publicly announced beta-tests of a similar concept for almost a year.
Joost faces tremendous competition both as an Internet Video provider and in using peer to peer architecture. I don’t see Joost having sufficient intellectual property protection to own much geography in either space. In fact, I’d be surprised if there weren’t already a number of patents for video distribution that claim to cover part of the landscape Joost is trying to fence in. Execution and marketing are likely going to be determinants of their success; that is always a risk.
Then there is the issue of distribution: TV through the net is a crowded space rife not only with competing technologies but also complex “old-media” distribution agreements which can limit access by new parties. (It’s no accident, for example, that HBO doesn’t release full length programming on AOL. If they did, they’d have some real issues with their Cable and Satellite Subscription clients). …
…The efficiency and potential cost-effectiveness of Peer to Peer technologies may prove visionary for streaming TV. The logic of the architecture makes sense. The proposed bundling of search, chat and instant messaging features in the Joost platform is also a novelty feature that may appeal to users.The founding team of Joost knows a few things about viral marketing, and building buzz. There’s little doubt they are skilled at hype. Early announcements seem keyed to build on that. The principals also have a track record of building a high functioning product.
There is little doubt the company has tremendous street credibility following Skype; and plenty of capital to play with. Being on the wings of that success story may help them now, or they may prove themselves to have been a one trick pony (though with a sale in the billions of dollars, it’s no pony to be ashamed of).”
So here we are almost two years later. The move to the browser stands to correct some of the consumer adoption challenges that have hampered the company (reports are they have less than 1 million users globally) but the bigger challenges, the challenges of content ubiquity and competition? Those still remain.
That makes it hard to think of Joost as a hot prospect. But here’s a more measurable test: If you go to Sequoia Capital’s website, the firm lists a handful of criteria that form the foundations of solid companies. Sequoia tags these as “elements of sustainable companies.” They say “Start-ups with these characteristics often foretells the success of a business and the likelihood of it becoming an enduring company with a sustainable business plan.” Sequoia has a very good track record and they invested in Joost’s A Round. Viewed today, how does Joost measure up – how many of the ten points fit today?
1. “Clarity of Purpose" (Summarize the company’s business on the back of a business card.)
Joost – what they’re up to is straight foward. They can probably summarize their business simply. Point 1, check.
2. "Large Markets" (Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.)
Joost- distribution of professional video is definitely a growth market or an area of disruption but the pace is questionable. When talking about movies, new data shows consumers still spend most of their movie money on DVDs. The online segment is tiny. That will change but the market size and schedule are debatable. Point 2 – probably check but debatable.
3."Rich Customers" (Target customers who will move fast and pay a premium for a unique offering.)
Joost is a free service for consumers. No richness in that direction. As for the advertisers who as payers might be called "customer number two" – they seem to be looking at services like Joost as experimental projects. They’re committing money to an assortment of web video offerings but the reality is, so far, none have settled on any of these markets as a sure thing. Point 3- not today.
4. "Focus" (Customers will only buy a simple product with a singular value proposition.)
For the consumer, if buy is translated to "adopt" Joost isn’t really a singular value proposition. they offer a nice service but they’re only as good as their content. I’ll watch on NBC or ABC or CBS or FOX depending on what’s on. If I’m looking at web video, Joost may as well be just one of many channels to choose from. As for the advertiser as customer – singular value? like the consumer who goes where the programs are, the advertisers go where the consumers go. Point 4- not today.
5. "Pain Killers" (Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.)
Is anybody really demanding a new video service? Are consumers flocking to these markets? Data on DVD buying behavior and other research says not yet. eventually, sure, but not today. Today, these services are novelties. There is no pain. Point 5- Not today.
6. "Think Differently" (Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.)
Going with an application when consumer behavior favored the browser went against conventional wisdom but was a mistake. Going with a browser solution matches the rest of the market and offers far less novelty. Either way, hard to see enough separation from the rest of the market to call the service a stand out. Point 6- not today.
7. "Team DNA" (A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. "A" level founders attract an "A" level team. )
Joost assembled a solid team and hired a highly regarded executive. On team, they seem strong. Point 7 – check.
8. "Agility" (Stealth and speed will usually help beat-out large companies.)
January 2007 to September 2008, total customers under 1m unique globally. For a web service, that’s a slow pace out of the gate. And as for stealth? Major PR campaigns around financings, heavy buzz over early launch, hiring a talent agency partner? Not the image of stealthy at all. It almost seems the hype on Joost peaked too early. Point 8 – Not today.
9. "Frugality" (Focus spending on what’s critical. Spend only on the priorities and maximize profitability.)
As a private company, there’s little window on how Joost is spending its resources. The only insight predates CEO Mike Volpi and that was the Series A financing raised from Asia Europe and the U.S – with the intent of going global from the beginning. That rush to capture to world may have spread the company thin and distracted focus. Or maybe it didn’t. Point 9- Debatable or Uncertain.
10. "Inferno" (Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.)
$45m in a Series A financing, and that buys only a minority stake? Effectively, Joost had a value, post money of near or greater than $100m from its first financing (seed money from founders notwithstanding). That’s not a frugal, thrifty start. Point 10- not today.
Six, maybe seven, out of the ten criteria don’t appear to fit Joost today. Only three or four of Sequoia’s key points hit? Even on a generous bell curve, that’s not a passing grade.
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