By Kurt Peters
Scott Ferris once was a fan of broadband. In fact, he worked on cable systems in London and Orlando that relied on broadband technology to deliver content to consumers.
But today Ferris focuses on delivering content to consumers over the tried-and-true POT—plain old telephone—line. “I knew from my experience that when you get into 30-year-old cable systems, you wouldn’t be able to get broadband into the home,” Ferris says.
Ferris has used his insight into the nature of the broadband business to help build Vendaria Inc., which creates video presentations for retailers’ and manufacturers’ web sites and that could change the way consumers experience shopping on the Internet. If he had expected broadband to be the key platform to deliver video, he’d probably be out of business today, he says. “It was a big bet,” Ferris, CEO, says. “All the investment capital was going to broadband, the angel investors in our company were broadband. But I didn’t think we could make a meaningful business out of broadband in three years.”
Vendaria’s video product has been in the market for barely a year and a half. But in that time it has racked up some high-profile users. EddieBauer.com did an extensive test of Vendaria videos during holiday shopping last year. Starbucks Coffee Co. uses Vendaria’s videos at its web site to sell coffee makers and is developing a coffee education video. Toy manufacturers Hasbro Inc. and K’nex Industries Inc. have created videos that appear at Amazon.com, as well as at other sites. And the company is in discussions with other retailers and manufacturers.
The holiday test
While most retailers don’t like to disrupt their tried-and-true approach to selling during the holidays, that’s exactly when The Spiegel Group’s EddieBauer.com put Vendaria videos to the test. In fact, EddieBauer.com tested the videos over a wide range of products and price points, from an $18 snow globe to a $298 leather jacket. While it found that the snow globe video wasn’t effective—“Snow globes don’t need a lot of explanation; people know what to expect of them,” says Brian Walker, manager of business development at Eddie-Bauer.com—videos were effective with higher priced products. Conversion rates were 10% to 15% higher on the products that featured video, Walker says.
Similarly, Starbucks is pleased with the results of its video promoting a coffee brewer. “Viewing the video has had an impact on whether a customer buys,” says Lourdes Orive, director of interactive operations at Starbucks. “Viewing the video makes people more inclined to buy.” Customers watched the video nearly 34,000 times between May 30 when it went live and the end of the year. The last few days of the year saw more than 700 viewings each day.
The most viewed products at EddieBauer.com during the holidays were a men’s watch and a men’s leather coat. “This feature is useful for customers considering higher priced products, especially if they’re gifts,” Walker says. Customers also took to the videos on products that had multiple features, such as down coats or flannel-lined jeans, where customers sought additional explanation.
Eddie Bauer’s and Starbuck’s results confirm early experiments on the web. Gifts.com, a division of the Reader’s Digest Association Inc., experienced a lift in sales when it displayed a Mothers Day pendant in a video created by RichFX Inc. In fact, viewers of the video were three times more likely to buy the pendant than were viewers of the traditional flat image, Gifts.com says (See Internet Retailer, July 2001, p. 40).
EddieBauer.com still has not computed ROI on the videos, Walker says, because too many variables come into play during the holidays. Among them is the fact that conversion rates during the holidays are typically higher than the rest of the year, so it’s hard to tell what effect videos by themselves had on conversion rates. Furthermore, Eddie Bauer did not promote the videos strongly and customers did not come to the site expecting them, so they were less likely to view the video if they just came across it on the site, Walker says.
Nonetheless, Eddie Bauer liked the experience with the videos and will continue testing, Walker says. In fact, one of the features that attracted Eddie Bauer to Vendaria in the first place proved to be important to the videos’ success on the site: They were easy for consumers to use. “We explored video many times in the past, but we didn’t like the idea of customers having to pick from a menu of video options,” he says. “We never saw what seemed like a good experience until Vendaria came along. The Vendaria experience was designed from the customer perspective.”
Streaming media for dummies
Part of the problem that Vendaria had to solve as it was developing its product was how to deliver video to consumers without broadband and without requiring them to install a plug-in to be able to view the video. Ferris directed Vendaria’s tech development team to focus on creating a technology that consumers would find easy to use. The team came up with what Ferris dubs “streaming media for dummies.”
It works like this: When a consumer accesses the video, the Vendaria system detects the consumer’s operating system, media players, browsers and connection speed. It takes all that intelligence back to the Vendaria system which then downloads the version appropriate to the customer’s operating system. Meanwhile, the customer sees a message that says “video loading.” “The ease of use and the user experience in viewing the video was a big draw for Starbucks,” says Orive. “Users with a 56K connection can view the video comfortably and easily with whatever media players they are using.”
While the tech staff was developing the delivery technology, Vendaria also was researching the market. Ferris says the company spent six months trying to get into the minds of Internet shoppers. What those shoppers wanted, he reasoned, would shape the Vendaria technology. The results were no surprise: Consumers liked the convenience of online shopping, they liked being able to shop on their own time and they liked being in control of the process. They didn’t like the difficulty of getting a feel for the features and benefits of a product and they found 2-D products with text uninspiring.
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
