When Famous Frames Mobile Interactive, which produces original media content for cell phones and the Internet, launched last week, executives weren't rubbing their hands together waiting for the money to roll in.
A windfall is at least two years away. In the meantime, there'll be a lot of experimenting to do.
"New media is where the future is in advertising," said Mark Miller, chief executive of FFMI, based in Culver City. "But it's still the Wild West."
Los Angeles is a petri dish for emerging new-media content houses. FFMI, which grew out of a talent agency for storyboard and animation artists, focuses on Web and mobile distribution. Go TV Networks Inc. in Sherman Oaks and Cinema Electric in Encino are solely focused on content for cell phones.
While these companies are ahead of the technological curve, it's difficult to say when they will start making money through ad sales. Short clips on the Web are showing more promise for monetization than "Mobi-sodes," or short episodes of content for mobile devices such as cell phones and iPods.
The most prominent new media studio, Vuguru, is backed by Tornante Co., the investment company led by former Disney chief Michael Eisner. Vuguru didn't start turning a profit until recently, and the money came more from a distribution deal with Japan than from ad sales.
Vuguru's Web series "Prom Queen" attracted 15 million views during its 80-day series in the spring. A comment Eisner made at a media conference after the success of the show "We made history, but we didn't make any money" has since been widely quoted.
Vuguru's latest project is a 10-week Internet video prequel to a book by Robin Cook set in Santa Monica called "Foreign Body." The Web series debuted May 27 and continues until the book release in early August. It will be shown on ForeignBody.tv. Verizon Wireless's VCast will distribute the mobile version.
The high-definition show will feature ads much the same way "Prom Queen" did, including a 30-second preroll, product placement, and embedded ads such as a sponsored frame around the screen. "Prom Queen" advertisers included Pom Juice, Fiji Water, Teleflora.com and Victoria's Secret.
Online advertisement is a game of how much traffic a site can garner. If enough people watch a Web show, it can bring in revenue through a blend of advertisements.
"People are still struggling to figure out the right model for online video distribution, but ultimately, if you have lots of traffic, you can make money," said Greg Sterling, analyst at Opus Research.
It's not just any traffic, though. Sites raking in significant ad revenue see tens of millions of unique visitors a month. About 90 percent of all online ad revenue is taken up by the top 50 publishers on the Web, including MySpace, Google, Yahoo and Fox, according to the Interactive Advertising Bureau. Last year, advertisers spent $21 billion online.
"Even though there are millions of millions of Web sites out there, it's a tiny fraction that make real money," Sterling said.
One obstacle is length of content. Studies show online videos are watched roughly six minutes a day. That's why each episode of "Prom Queen" is only 90 seconds long. Finding ad dollars to advertise against these vignettes of Internet video is much more challenging than monetizing an average of four hours that Americans spend in front of television every day.
Experts say people will get accustomed to watching longer content online, as technology will improve the viewing experience on computers.
"There shouldn't be any reason people would not watch a full half-hour show in the right condition," Miller said. "People watch full-length movies on iPhones on train rides."
But the viewing experience on most phones is still leagues behind Internet TV.
There are already millions of users of Smart Phones, such as Apple's iPhone and Helio phones. The highly anticipated Sprint Instinct is expected add to those numbers.
But most Americans still don't subscribe to data packages on their phones, and even when they do, video clips on most handsets stutter and freeze because the devices can't load the content quickly enough. It's like watching an online video with a dial-up connection. Advertising against such content is next to impossible, Sterling said.
"Mobile content houses are going to be hard-pressed to survive in the near term," he said. "Even though people have high hopes for mobile video, with the exception of the iPhone and maybe a couple other devices, the viewing experience is so horrible that there's no hope of monetizing the content right now."
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