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Video Start-Ups Vie for Place Beside YouTube

For many Internet users, YouTube is synonymous with online video. But Mike Michaud and several friends who live in suburban Chicago are trying to change that.

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CNBC.com
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Mr. Michaud co-owns Channel Awesome, an aspiring Viacom of the online video world, which promotes online shows about video games, comic books and assorted realms of popular culture. He was a casualty of the recession, having been laid off by Circuit City, the electronics retail chain that later was closed, and now he is a beneficiary of the advertising rebound, having doubled his revenue last year, enough to employ seven people full time.

“People may still scoff at online video, but this is a real business now,” he said over breakfast recently. Channel Awesome’s primary partner is not YouTube, but Blip.tv, which distributes made-for-the-Web series and surrounds them with ads. The companies that create these series are small, are popping up in unexpected places — like Mr. Michaud’s home — and are creating unlikely stars in lucrative niches.

Channel Awesome’s best-known weekly show, “Nostalgia Critic,” which another Circuit City cast off, Doug Walker, produces from his home five minutes from Mr. Michaud’s, draws about three million views a month. Several of Blip’s top production partners are on track to earn at least a $1 million in ad revenue from Blip this year, said Dina Kaplan, a co-founder of Blip.

Like YouTube , Blip splits advertising revenues with Web series producers. But unlike YouTube, which also streams amateur videos, and Netflix, which streams feature films and television shows, Blip is solely focused on those producers. Rather than competing directly, it is trying to carve a niche next to YouTube in the expanding world of Web video.

“This ecosystem that we started working with in 2005 has finally come into its own,” Ms. Kaplan said, citing the success of companies like Mr. Michaud’s, Blip’s relationships with top advertisers like Procter & Gamble, and the growing popularity of streaming video on televisions.

Shows hosted by Blip’s servers now account for 330 million video views a month, the company says. Blip is in its third round of financing by venture capital firms that have invested $18 million. But what the system has been lacking, Blip executives and other industry specialists say, are ways to find made-for-the-Web series that are worth watching. The problem, in industry parlance, is discovery, and it is a huge hurdle for Web video makers and sponsors to clear.

“There just isn’t anywhere right now that focuses on original Web series and presents them in a clean, curated, well-lit environment,” Mike Hudack, another co-founder of Blip and the company’s chief executive, said last month as he showed his solution: a new home page for Blip that is updated daily with links to new episodes of shows.

The new home page divides shows into categories like sports and comedy, ranks shows by popularity and creates what Mr. Michaud calls “real show pages” for users to visit.

YouTube, too, is trying to solve the discovery problem by programming its home page and putting a new emphasis on channels of content. In March, the company, a unit of Google, bought a Web video production company called Next New Networks, and now the employees of Next New are training other budding YouTube producers.

Like so many other Web video companies, Blip is a partner of YouTube, so it avoids any insinuation that it is a competitor. But it would clearly prefer to rack up video views on its own sites, not YouTube’s.

The audiences for most Web series are still puny by television standards, and so are the budgets for the series. Mr. Michaud, 29, who wore to breakfast a yellow shirt with the star symbol from Super Mario Bros. 3 imprinted on the front, said online video itself “still has a lot of growing up to do.”

“My company has a lot of growing up to do,” he said, “but I believe that sometime in the next one to two years someone will create that one series that gets everyone talking.”

That one show, he said, could then start pulling people from traditional television “to the endless options of online video.”

Many of Blip’s top shows are part of a network, the same way that MTV is an umbrella for all sorts of shows. Along with Channel Awesome, Blip praises Rooster Teeth, a production company based in Austin, Tex., that makes the action drama “Red vs. Blue” and “Immersion,” which tests video game tropes in real life.

Mr. Hudack’s other favorites include “Dusty Wright’s Culture Catch,” a music and culture talk show and blog, and “Aidan 5,” a black-and-white sci-fi drama produced in Columbus, Ohio, and based on a film short.

“When it comes to Web video, Hollywood could learn lessons from Illinois and Texas,” Ms. Kaplan said.

As the channel and show names imply, success often results from tackling topics that appeal to young viewers. They are some of the same people who are “watching less television,” Ms. Kaplan said, “so if advertisers want to reach them, they have to start advertising on Web series.”

Last week, Blip signed its latest content deal, with a management company called the Collective, that will steer more videos — and thus more views and ad impressions — in Blip’s direction. The Collective represents online stars like Lucas Cruikshank, who plays a helium-voiced character called Fred in a hit YouTube series. In celebration of the deal, Blip’s new office space on Broadway in the NoLIta neighborhood of Manhattan was rearranged into a dance floor last Thursday night, where staff members at Blip, executives at the Collective and friends from YouTube all mingled. In the back, out of reach of 200-plus partygoers, an unopened bottle of Champagne sat at an employee’s desk.

To hit the million-dollar mark that Ms. Kaplan mentioned, Channel Awesome has to add new series and maintain the audiences for its current series. Mr. Michaud is now looking for warehouse space in suburban Chicago, and benefiting, he said, from the weak real estate market. He considered the vacant Circuit City building where he once worked, he said, but concluded that the space was too small.

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