February 28, 2002, 12:00 AM

How an infomercial and webcast ancestry led to an e-retailing video business

(Page 2 of 2)

And the company found that consumers understood the frustrating nature of video over the Internet. “Consumers told us, ‘I’m not a technologist. I don’t know what technology I have. I don’t know my connection speed. I don’t know what browser version I’m using and I don’t know what a media player is,’” Ferris says. “We took that information back to the technologists.”

Vendaria’s research into consumer attitudes toward online videos reflects what other researchers have found as well. “There’s no doubt that plug-ins are a gating factor, they cause a challenge to widespread adoption,” says P.J. McNealy, research director of Gartner Inc.’s GartnerG2 research group, which surveyed consumer attitudes about plug-ins in 2000. “Plug-ins are widely viewed as annoying.” At the same time, GartnerG2’s latest research shows that fewer than 10% of Internet households have broadband connections.

While video presentation at retailers’ web sites seems like something radically new, Ferris says it really fits into today’s thinking that for the web to be successful, retailers must incorporate time-tested store techniques into the web. “We’re fitting into the legacy of co-op programs,” he says, “in which the manufacturer is allocating resources to the merchants to help sell the product.”

Keeping control

While the retailers get the credit for having the video on the sites, Vendaria’s true customers are the product manufacturers, Ferris says. The pitch to manufacturers is that videos give them control over their co-op merchandising that they do not have with in-store merchandising. “We tell the manufacturers, “You’re spending 3-6% of your revenue in co-op spending mostly in brick-and-mortar stores, but you don’t have lot of product control or message control, you have no ROI reporting, you don’t know the effectiveness of that co-op marketing versus other marketing tactics,” Ferris says. “With video you get consistency and you get results.”

Retailers benefits from the videos, he says, because they get what they want: a tool to help sell the product, free content for the web site, ease of implementation and branding of the experience. Manufacturers get to control the message about their product, provide support to the retailer and get back information about buyers and prospective buyers. “It’s really about the relationship between the merchants and the manufacturers and what needs to be done to sell the product,” Ferris says.

Vendaria hosts the videos and charges 24 cents per view. “It’s less than the cost of a postage stamp,” Ferris says. “And the manufacturers get their story in their own voice to the consumer right at the moment the consumer wants to hear it.” In Vendaria’s intercept surveys of consumers who have viewed the video, two-thirds of viewers said the videos made them more likely to buy, Ferris reports. Videos cost about $2,000 to produce, Ferris says.

Vendaria’s history is a reflection of the development of the web into a mainstream medium. The company was founded by Cary Roth, who has a background in infomercials. A forerunner to Vendaria was a company that Roth started call The Broadcast Zone. It created online events that had buying opportunities. For instance, it would conduct a webcast with an athlete and surround the webcast with sponsors’ pitches for products related to that athlete. Viewers could click on a button and buy online.

Roth learned from that experience that hundreds of people would watch the webcast but that thousands would retrieve the archived event to watch later. “That blossomed into an on-demand business model that became Vendaria,” Ferris says. When it became apparent that the on-demand model was taking over, the company sold the Broadcast Zone assets and re-focused on on-demand videos. Ferris himself was part of the widely watched effort by Time Warner to wire up Orlando with broadband for interactive TV.

With that as a background, it’s not surprising that Vendaria is now also producing videos that will inform customers and not just sell products. Next up at Starbucks.com is a video, in production now, about the four fundamentals of making good coffee. And that could be just the start. “We are beginning to look at the different things we can do with video,” Orive says. “This has opened us up to more possibilities that we are planning to explore.”

kurt@verticalwebmedia.com

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