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How Flipagram aims to take on YouTube

With a growing number of ways to share videos, from Facebook and Instagram, to Snapchat and Twitter, Flipagram is tapping into consumers love of using music to turn those shaky hand-held clips into smooth videos — with a soundtrack.

The start-up is a tool for quickly creating "Flips" or "Flipagrams," video stories which combine videos, photos, text and music. Flipagram is the only app with global music licensing deals, giving users free access to 60-second clips from some 50 million songs; the video stories include links to buy the songs used from iTunes or Spotify, with the company taking a cut.

And the service is exploding. The company said in June that more than 200 million creators have come to Flipagram since it launched in November 2013, creating nearly half a billion video stories. It estimates that there are more than 4 billion video views of Flipagram photo and video moments daily, up from 1.6 billion a year ago. While those videos are shared across social media, largely Facebook and Instagram, to put those numbers in context, Snapchat has about 10 billion daily video views, while Facebook announced in November 8 billion daily video views, double the number the prior April.

Flipagram has 200 million users.
Source: Flipagram
Flipagram has 200 million users.

And founder and CEO Farhad Mohit says the company's strong relationship with the music industry is a huge advantage. "Even before we had deals with the music industry we had the artists themselves coming in and telling us to use the clips," said Mohit. Free previews of songs "now get attached to hundreds of thousands of the videos people create, shared to millions of fans and friends. And every one of them is an ad and a link to buy that music," he said. In addition to the cut Flipagram takes from music sales, the company also charges for using more than 60 seconds of a song.

Next up for Flipagram: advertising. "If you think about video being important then you have to think video advertising will be important. And video advertising you have to think, how are millions and millions of businesses going to advertise their wares with video? They need people, they need video content and the kids are the ones who know how to create this content," said Mohit. "Matching up video advertisers with kids who know how to use the medium and know how to produce lots of video content I think that's where you'll have the magic happen with video advertising on scale."

Flipagram's cozy relationship with the music labels stands in contrast to the challenges YouTube is facing right now from artists. Taylor Swift, U2, Paul McCartney and dozens of other musicians and the three largest music labels, wrote an open letter to Congress taking issue with the Digital Millennium Copyright Act. The 1998 law defines how internet companies can use content, including songs, uploaded by users. Bottom line: the music industry wants to be paid more for use of their music, and some control over how it is used.

"Taylor Swift should be able to decide which of her songs are available for free and which are part of a paid subscription service. Or she should be able to opt out of YouTube if you won't give her this choice," wrote artist manager Irving Azoff in the open letter to YouTube in May. "Because of the outdated Digital Millennium Copyright Act, the only way for an artist to keep a song off YouTube is for that artist to send YouTube a notice every time that song is uploaded by a different user. It is impossible. The Content ID system that you flaunt is meaningless when YouTube continues to hide behind the 'safe harbor' provisions of the DMCA. If YouTube cares about copyright management then join the music business in its efforts to reform the DMCA."

Mohit notes that YouTube is in a fundamentally different position than Flipagram is because of the duration of videos on the platform. The average YouTube video is about 4 ½ minutes, so users can upload an entire song. "The average video on our service is 30 seconds long so we don't deal with consumption — ours is just promotion," said Mohit. "So I think that ... the thing that YouTube has to think about is that they're a great platform for millions of people to create videos ... we're a platform for billions of people to create videos. And when billions of people create they're not going to create them that long, so it's a whole different dynamic that's happening here. We're democratizing it even further than YouTube originally did."

Flipagram also is different in that its ongoing success is tied to the growth of video on Facebook and Instagram, which are a shorter-form, social alternative to YouTube. And Flipagram won't benefit from the surge of live streaming video tools, YouTube recently announcing a new live service to join Facebook Live streaming as well as Twitter's Periscope. It also could suffer as its millennial audience increasingly shifts its interest to live video.

Plus there's all of Flipagram's competition, including music-oriented social network Musical.ly, which has an audience of nearly 100 million users. Though it's smaller than Flipagram, it has an advantage in the live space: it's spinning off another app, Live.ly, focused on live streaming. And there are other social video apps including Slidely, VidMe and Dubsmash. There may be a range of rivals, but Flipagram has raised more money than any of them: $70 million from big name VCs including Sequoia and KPCB, with legendary investor John Doerr on its board.