2H online video investment review: investors in search of disruption

Online video is one of the most disruptive digital segments due to its potential to completely reshape the way businesses and consumers interact with video platforms. While the segment does not see the massive inflows of cash into start-ups that are witnessed in e-commerce or gaming, successful investments can provide instant global recognition and huge returns. A sizeable share of venture capital investors are still searching for their Netflix, as the US VoD giant goes from strength to strength.

Global investments in online video during the first half of 2014 reached $388 million across 33 deals. That is well above the $281 million invested across 48 deals in the same period a year earlier and is practically even with the 34 deals raising $331 million in the first half of 2012. The trend of investments zeroes in on disruptive platforms, as consumer habits continue to shift online. As mediums such as television and traditional pay-TV are increasingly seeing competition from online alternatives, there is considerable opportunity for new segments to emerge and sweep up consumer interest. Investors are certainly recognising this. For example, YouTube food channel network TasteMade attracted a $25 million financing round, while at the other end of the value scale Bubbl, which lets users share video clips, picked up $40,000.

A good example of the disruptive investment trend is Aereo, which picked up one of the biggest investments in the first quarter, but is still battling for survival in the courts. Online video is certainly searching for another Netflix, but perhaps even more so an Uber, which can transform consumer practices on a global scale.

Sport is a particularly in-trend video segment this year, with three separate companies operating in this space raising money last quarter. GameChanger’s $6.8 million for an amateur sports video and content network underlined the segment’s attraction. The platform offers features such as animations of games as they unfold, allowing fans to follow online in real time. Fitness platforms are also in demand. Peloton, which offers instructional cycling exercise content to users, took in $14.4 million for its cloud-based streaming service. The firm is opening an 8,000 square-foot location in New York for a film production studio where live cycling classes will be streamed to Peloton users globally.

Alibaba and Yahoo were the dominant firms in terms of M&A in the second quarter, with both internet majors looking to secure new video traffic and premium ad audiences. Alibaba made the biggest purchase of the quarter, investing $1.2 billion in China’s biggest video operator, Youku Tudou, for a 15.6% stake. Alibaba also added a 20% stake in cable and internet TV firm Wasu to its expanding video portfolio. It will be interesting to see if the Chinese giant chases video deals outside of the domestic market following its long-awaited IPO.

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