with Brightcove President and COO David Mendels
 |
|
David Mendels |
FierceOnlineVideo editor Jim O'Neill caught up with Brightcove President and COO David Mendels recently to talk about the company's recent IPO, its App Cloud product, the challenges--and challengers--it faces in the online video platform space and the hurdles Mendels sees for online video moving forward. Brightcove (Nasdaq: BCOV) counts among its customers NBC Universal, Fox, Gannett, Showtime, Discovery, General Motors and Macy's, among many others.
Mendels said the Cambridge, Mass.-based company is poised for big growth as more content owners recognize the potential of online video, and come to grips with the reality that the do-it-yourself platforms many have been using can't handle the device fragmentation in the space and are struggling with the demands the business is creating.
Mendels, a former Adobe executive who joined Brightcove in January 2010, has been a board member since 2008. He's guided it through some significant growth and, of course, the February IPO when it raised some $55 million in cash.
The stock debuted at $11 and quickly rose to $14.30 by the end of the day. Mendels said he doesn't often look at the stock price, but, for the record, it closed Monday at $18.75 and has traded in a range from $14 to $25.50... just in case you were wondering, David.
FierceOnlineVideo: Brightcove's IPO was talked about for a long time. How's it feel to finally be a public company?
David Mendels: The IPO was an exciting milestone for us. We think of it as a start, not an exit. We are really excited about where we're going as a global independent company. We had great growth last year, 45 percent, and we're really excited about that. Our customer list is growing in every region of the world, the small, medium business part is growing very nicely. The premium part of our business is seeing more of the big premium customers coming on line. So we're really excited about that.
FierceOnlineVideo: Brightcove, in December, rolled out a new product, the App Cloud. How's that going?
Mendels: We started talking about it last year... we wanted to diversify our products a little. With the introduction of the Brightcove App Cloud we went from a one-product company to a multi-product company.
It's another cloud-based platform for delivery of rich content experiences. It's about delivering these cross platform apps that are really content rich that might have video, but they have every kind of content: images, Twitter feeds, news feeds, image galleries, et cetera. And, it's just an exciting time for us because we're expanding from being this video company to being a company that's really now about cloud platforms for digital media. And with video being a very core part of it and obviously the bulk of our customers and revenue.
FierceOnlineVideo: Has it had an impact?
Mendels: We're seeing a lot of uptake. In fact, NBC Universal is now a customer of ours for both the Video Cloud and the App Cloud.
So it really talks to what we're trying to do as a company, with this synergy here. As we talk to media companies and non-media companies, marketers or non-profits that have a mission to communicate, we're able to provide a more strategic set of services to them.
The whole world's been changing because of the introduction of these phones and tablets and smart TVs that are coming. How do you reach all the people that are coming with these things?
NBC adopted App Cloud for their Emmy application. It's a branded app with high-quality images and content for the voters involved in the Emmy Awards. It lets them look at all the NBC shows. It's a great iPad experience, and it's really exciting for us.
FierceOnlineVideo: Talk a little about how the market is changing.
Mendels: Part of (chairman and founder Jeremy's Allaire) vision is that every professional website is going to have video. The right model for this is a cloud-based model, from a scalability point of view, from an economic point of view, from a workflow point of view... we're seeing that with the big media companies.
NBC, five or six or seven years ago, was one of those companies that said "we're going to build our own platform." Now, what they're realizing is they don't build their own email system, or finance system, why should they build their own online video system?
And we've seen a lot of opportunities in media based on that.
FierceOnlineVideo: There are other OVPs out there that also have some of NBC's business...
Mendels: We didn't win 100 percent of their business, we have a nice piece of their business. Some of the properties are using one of our competitors, some of them are using us. You are 100 percent correct. But I think we're in a good position to keep growing here. We're very excited about it, we have a lot of traction there.
And, for us, the nice thing is we can go in there and sell not just the video, but App Cloud as well.
It puts us in a more strategic position that's very different than the OVP competitive landscape. None of our OVP competition can do that. And so, it changes the game in a positive way for the customers to be able to say we can get a more complete set of services.
FierceOnlineVideo: Everybody's talking about more content as we move forward. But it's also become more competitive in the space, and there is the probability that, at some point, prices will drop, that the space could be commoditized. Is that out there? And, does the App Cloud make the difference for Brightcove as a value added piece?
Mendels: That's a really good point. I think App Cloud is a big differentiator for our company and it changes the way we talk to customers and the kind of services we can offer them.
I think the notion that this is sort of an easy commodity is a little bit over played. I definitely hear some people saying that. But, while I get your point, the problem of HTML5 delivery, for example, with advertising, with analytics, with getting HTML5 security, and encryption, with getting it to work on not just iPads, but iPhones and Android devices and connected TVs, this is still an immature space. It's not yet a commodity, it's an area where we have made very large investment and we have some competitive advantages. I still think there's a lot of room for growth, especially with change and innovation.
But your point is a good one, by offering this broader service that cuts across this cloud-based service for delivering apps, I do think we change the position and we change the way the customers look at us.
FierceOnlineVideo: Brightcove serves an array of customers, from some very large enterprises, content owners and broadcasters like NBC and Discovery, to SMBs and mom-and-pop operations. That has to cause a mess of support issues, especially with so many small customers. How does that impact the customer service, especially for the big guys?
Mendels: We've had to invest a lot in building a scalable system, and we have to continue with that. We're doing 750 million streams a month. We're ingesting huge amounts of content, I think late last year it was 11 hours of content every 60 seconds, and that continues to grow. Every day, we're sort of like, "Wow! Look at this!" It just continues to grow. So we have to make those investments to make sure the system scales and I say for the most part we feel really good about our ability to do that and about how we've been serving our customers.
The smaller customers don't consume that much. It's really 20 percent of the customers requiring 80 percent of the scale.
So, we built this thing to scale. The vision from the beginning, and this goes back to Jeremy's background and to my background and to others here. We came from companies where everything we've done for 20 years has been about building products that can scale to millions of customers.
We believe this is a similar opportunity that can scale that way. Because it's a cloud-based service, you get a lot of efficiencies in delivering this.
We've got great support organizations now in Asia and Europe as well. We expanded over the last 18 months or so into more parts of Asia, for example. We had an operation in Japan for quite a few years. We added Singapore, Korea, Australia-and they've been very strong for us. So I think we're doing quite well in that regard.
The model lends itself well and I think we've been able to figure out what those entry level customers need and what the little more advanced customers need.
We have a great elite professional service team that can help a company like NBC with an implementation or an integration, or with a customization.
For our Express customers, they use the product out of the box. It just works. We see this all the time: A law firm that wants to put up 10 videos of their partners introducing the firm can be up and running in an hour, it's that simple.
It does scale nicely. Obviously, we have to keep working on that but I think it's been a pretty good story so far.
FierceOnlineVideo: What do you see in terms of consumers driving video content consumption?
Mendels: We're all seeing the same thing, we're all experiencing the same thing. I'm watching stuff on my iPad, and when I turn on my TV, more often than not I'm watching streaming Netflix (Nasdaq: NFLX), or a download from Amazon (Nasdaq: AMZN) instead of broadcast TV.
Consumer behavior is shifting. People expect the content they're consuming to be available anywhere, anytime, on any device. These devices that are just great experiences, it's just a fantastic experience.
Being able to deliver a service that meets the needs of a publisher, so that they don't have to know everything about every device in the world, and to allow consumers to really consume content, that's what we're trying to do. And I think it's pretty exciting. In my personal life it's been a very large transformation. I watch nearly everything over the Internet.
On a global basis, we're still early and it's going to be a huge, a continued driver for years.
FierceOnlineVideo: Do big media companies get just how much of a change is coming? There seems to be a lot of resistance at times.
Mendels: We see a lot of interest, but it is all over the map, still.
Even within the big media companies, they're not speaking with one voice. So you have to be aware that there are digital folks, and non-digital folks and there are still plenty of conflicts and issues that relate to rights and advertising and partnerships and the like. We definitely see this.
We've done some work with Showtime and the Roku box that is really compelling. Showtime is a good example.
When I was over in the U.K., I was meeting with some of the big broadcasters over there, Channel 4 and Channel 5. Both of them have investments in multiple delivery systems for connected TVs, whether Samsung or LG, Xbox or others.
We do see quite a lot of major broadcasters who are aggressively investing in it, I think inside the U.S. as well, we definitely have conversations going as well with quite a few of our large customers.
I think the writing is one the wall, but you're absolutely correct, there are conflicts within these organizations as well, who's going to get to monetize what.
FierceOnlineVideo: The technology is changing so fast, how's that affect Brightcove?
Mendels: We're a technology company. We're geeks, to be honest, we love it. We have a great development organization. When you look at Jeremy, and also myself, you see people who are passionate about products and being on the cutting edge.
We're excited about some of the evolutions in the technical space and what's going on in cloud computing, that make it easier for us to do things now than just a couple of years ago by leveraging some industry trends in the technical space that we're excited about and that are going to make our services better over time and let us scale even more.
FierceOnlineVideo: There have to be some concerns with the speed of development...
Mendels: I think the biggest pain point for us, for everyone--I'll say a pain point but also an opportunity for us--is the continuing fragmentation of devices. We've invested very heavily in our HTML5 technology and it's not a simple matter. There isn't a clean single standard out there yet. It's closer than it was... but if you look at delivering a common player that has some value added functionality, like advertising and analytics, and have that go across iPhones, iPads, and multiple Android devices, that is still a very difficult task.
Those are interesting challenges from a technical perspective. But they're also opportunities that if we can solve them, we can sell that to our customers.
FierceOnlineVideo: How much help are you expecting from MPEG DASH?
Mendels: The fragmentation that's occurring is occurring at multiple layers of the stack. At the player side, you've got Safari on iPhone versus Safari on iPad, versus Chrome on Android and different implementations of HTML5. You go back one layer from that and you're talking about the codec you're delivering and you go back one layer from that and you're talking about the streaming protocol.
Each one of those has other repercussions. It changes what security is available to you. Is there an encryption model that's available? Are there DRM solutions that work with that? There are also cost implications.
I think MPEG DASH could be a unifying force across a lot of these streaming protocols. It seems to have the buy in from a lot of the major players, it's a standard, and so it could help reduce the fragmentation we're seeing today, which is creating confusion for customers and extra work for everyone. It's something we'll make investments in over the next year.
FierceOnlineVideo: Connected TVs are getting a lot of press, one of the biggest players that hasn't announced yet is Apple (Nasdaq: AAPL). What happens in the online video space if and when an Apple connected TV hits the market? Does it have the same impact with consumers that the smartphone has had?
Mendels: Well, there's no question I'd want one. I am a big fan of Apple devices. I just got the new Apple TV box. I don't know what an Apple smart TV will bring with it, but the connected TV space does feel a lot like the smartphone space before the iPhone arrived.
Back then, you had the Palm device, other devices and an early Windows phone, but no one had gotten it quite right. To use Steve Jobs' phrase, no one had figured out the magic yet.
So while you had phones that were highly functional, they weren't compelling for anything but email. What Apple did with the first iPhone was put together a phone that had huge value for the consumer and a new kind of experience.
I think that's where the smart TV space is.
When I look at an LG smart TV, a Sony smart TV, a Samsung smart TV, or I look at these OTT boxes, many of them are very compelling with great functionality, I can get all kinds of great content.
But I don't think the industry has decided that there's any magic there yet.
Customers buy them and they don't even hook them up to the Internet. There was browser on your BlackBerry five years ago, but you never used it.
Given Apple's track record the last few years, I'd bet on them. Maybe it'll be Samsung, or LG, there are a lot of companies out there trying to figure out what will make it so compelling that you can't wait to hook up your TV to the Internet. I think it'll happen.
FierceOnlineVideo: As more broadcasters and content owners look to go online with content, how different has the competition for the really big payers become?
Mendels: Five or six years ago, we were not a mature enough industry to serve the needs of an NBC or some of these big companies. So they built their own. And I think many of them are hitting a wall. There's another major TV company that we recently signed, they made as big an investment in DIY (do-it-yourself) as any company in the world. They had a significant investment that was "strategic."
But, over the past year, business people have been coming to them with more and more requirements about new devices, connected TV, formats, advertising. And they were going back to their management and saying, "OK, we need to double the team, the market is growing and we can't build this with the team we have."
And that triggered a "What the hell were we doing building this thing in the first place" response.
Now, they're a customer of ours. We're seeing more of that where the challenges in the market have become so difficult for companies to deal with that a lot of people are trying to find the right partner. And I think that we are that partner.
Media companies are media companies. They build content and sell advertising they don't want to build 100 person software companies. That's what we do.
I think we're absolutely seeing that curve where they can't build it on their own anymore and they're coming to OVPs and I think we'll win our fair share of that business.
FierceOnlineVideo: When you talk to an NBC, who are you seeing in there as competition?
Mendels: The market is fragmented, as you know. Typically, in the broadcast space, we run into thePlatform at the high end, we don't really see anybody else at the high end.
FierceOnlineVideo: What about Ooyala, Kaltura...?
Mendels: Mid-market, enterprise, some of the Web 2.0 stuff, things like that. Kaltura we run into, but that's more for education.
FierceOnlineVideo: What are the hurdles facing Brightcove over the next 12 months?
Mendels: It's really about execution for us. I feel like we're in a good position. Things have been growing nicely. And, the opportunity is really growing. The high end is opening up with more people looking at OVPs.
Our biggest worry isn't whether we have a strategic problem, or that the market isn't big enough, or that we don't have the right product for the market.
We sit around thinking, "Can I hire the right people in the right places fast enough." Execution is our challenge, but we're a good execution company, that's something we really have to nail.
That's the big evolution. If you look back to our early days, people used Brightcove more as an experiment, before it was mission critical.
Now, we are mission critical to our customers and we have to execute. That's what we're focused on and I think we're doing a pretty good job.
I don't think it's a strategic challenge; the market opportunity is really, really, fantastic right now. If we continue to execute, I think we're going to have a great year.