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Vendaria: Paving the Future of Web Marketing by Video

“Vini, Vidi, Vicci, Vendaria.” With its unparalleled ability to deliver streaming video content to the desktop of anyone with a Web browser and a dial-up Internet connection of only 36Kbs (requiring no special plug-ins or software), Seattle’s Vendaria, like Julius Caeser, triumphantly came on the Internet scene, saw an enormous opportunity, and it conquered. Specifically, Vendaria came into a market of more than 83 million low-bandwidth users who were seemingly unreachable with video content. It saw how it could use its technology to deliver a quality video experience over the Internet to the masses. And it has already begun to conquer the world of Internet video distribution, merchandising, direct E-mail and banner advertising — a world that has been disillusioned and disenfranchised by the Internet’s unfulfilled potential of the past.

Vendaria’s patent-pending detection technology and unique distribution methodology allow its OEM durable good manufacturer clients to measure how consumers are viewing their video content. Knowing which media player and browser the customer has, Vendaria servers can then deliver a video message in the appropriate format (and also track customer behavior right on through to conversion). To date, the company has produced hundreds of video product demonstrations for companies such as Eddie Bauer, Starbucks, Hasbro, Huffy Sports and other locals like Optiva, the Seattle Sonics, and King5.com. Vendaria hosts the videos, which appear on Amazon.com, drugstore.com and other Web sites, and charges manufacturers approximately 24 cents or less per viewing session. The price is substantially less than a $250,000 budget for a television commercial.

Is Web video effective? Vendaria president Scott Ferris has determined that the conversion rate of video viewers is 4 to 8 times the normal conversion rate at a Web site. In this interview, Scott illustrates how one of the Internet’s most visionary video distribution companies is basically a down-to-earth, common sense marketer. His insights and sound advice are priceless for anyone contemplating how to communicate more compelling content on the Net.

Seattle24x7: Scott, your background includes pioneering work in digital interactive broadband service for companies like TeleWest in the United Kingdom, and Time Warner and Media One here at home (and you’ve been vice president and general manager of Starbucks Direct, responsible for E-commerce enterprise.) Yet with the Vendaria business model, you are a champion of the low-bandwidth user?
Ferris: When I first came to Vendaria as president, one of the things I made very, very clear was my strategy of wanting to steer the ship away from broadband to the more practical dial-up market. My experience overseas in London as well as my Time Warner cable experience demonstrated for me that broadband was not going to happen in the next 3-4 years. I felt if you wanted to bet the company, you had to bet the company on dial-up vs. broadband. If we were successful in “cracking the code”, we would truly have a clear differentiation to the competition.

Today, that’s exactly what’s transpired. We spent nine months cracking the code for dial-up when nearly everyone else was mesmerized by broadband. Today we’re the de facto standard on the Internet for getting true quality video to dial-up users, including broadband. It’s really a case of fundamental market-based management, going to the end-user and solving their issues through technology.

Seattle24x7: How would you define Vendaria’s core business?
Ferris: Our core business is the legacy relationship between a manufacturer and a retail distribution partner under the guise of Coop [manufacturer’s] distribution funds. We’ve become sort of the virtual end-cap in a retail channel partners outlying e-commerce site, which is supported by the manufacturer. We call it Vpop for Video Point of Purchase.

Our technology platform, called Vendaria Envision(TM), and our business model, are tailored to solve the issues that manufacturers have in getting a consistent product message to an end-user at the point-of-purchase.

We’ve become the Switzerland of streaming media. Be it RealNetworks, Windows Media Player or QuickTime, we’re technology agnostic. All we care about is ensuring that we get a good quality video experience in the shortest buffering timeframe to as many end user consumers as humanly possible.

Seattle24x7: How does the system work?
Ferris: What we have done is crack the code for a dial-up user to get a seamless, quality experience with video on the Web. There are two ways we’ve done it.

One is that we’ve taken a kind of fundamentalist approach to the customer. The overwhelming feedback we got through our market research was “I love shopping on the Internet. It’s convenient. I shop on my own terms. The thing that I don’t like is that it’s difficult to decipher what a product has to offer from a flat digital image and text. I want a dimensional experience with the product.” Video solves all that.

Then we went back to the consumer and said okay, here’s the video solution, what can we do to make it more compelling to you? They said, well, we don’t want to have to work at getting it. Don’t make me have to know what computer I have, what connection speed I have, or what media player I have, and what version. I’m not about to stop and download a media player. If you can make it easy for me to get this video just by the click of a button, I’ll be much more likely to buy the product online, and much more likely to do more shopping online. Our goal was to take all the technology decisions away from the consumer and put the burden on our platform.

Seattle24x7: Your distribution system is also integral?
Ferris: We developed a delivery mechanism on our platform where we can go down to a consumer’s desktop as soon as the page is loaded that has our code in it. We do all the detection for the consumer. We detect their browser version, their media player, their operating system, and their connection speed. We transfer all that data to our platform that then goes out to five different content distribution networks — all the majors: Digital Island, Playstream, Activate and Akamai, etc., and we route that video over specific content distribution networks based upon the parameters of the consumer’s desktop.

For instance, throughout our history we have tracked the performance of these networks and may know that Windows ’98 with RealMedia 6.0 and Browser version Netscape 4.5 is going to stream better on Akamai than it may on Digital Island. We specifically marry that consumer’s configuration at the desktop with a streaming server network provider. And that’s why we can get a good quality video experience in a short buffering timeframe down to 36 kilobits.

Seattle24x7: This is all transparent to the user ?
Ferris: We characterize it as Streaming Media for Dummies. If you get a “Watch Video” button on any page that you visit, you’ve already been pre-qualified to get a good video experience. If you don’t see a ‘Watch Video” tile on any page where we have our code resident then you would not get a play button — you wouldn’t even know what you had the option to watch the video because we’ve determined that you fall into the 6% of consumers that we cannot support.

Seattle24x7: The system sounds very portable to other applications?
Ferris: Absolutely. We believe that what we’re doing in terms of our technology and our solution is democratizing video for the Internet. It applies to any online experience that can be enhanced with video, whether it’s the checkout process of an online e-tailer or a customer service application, or an enterprise-wide corporate environment. For example, you can do your benefit enrollment at the end of the year, and somebody can step you through that process with an on-air personality in video that’s auto-played. With our technology we can do anything to the presentation of the video. We can embed it, we an have it on a pop-up player, we can auto-play it, we can have it be user-activated. There’s lots we can do.

Seattle24x7: Do you collaborate on content development or produce it in-house?
Ferris: Thus far, in our Vpop business, we produce the content in-house. We have subject matter expertise on the production values and the techniques of producing a video that will yield the best result at low bandwidth. For instance, a lot of our Vpop video clips that you’ll see across our retail distribution partners is low-production value content. It’s not a fast-moving motorcycle along a country road, it’s white backgrounds, simple demonstration of the product with limited on-air “talking head” personality video, and there are certain techniques in lighting and backdrops and props and things that we do that from a throughput standpoint are designed to optimize the bandwidth connectivity threshold.

This is really for us to prime the pump and get our business launched. We’re not a production company nor do we plan to remain in the production business other than project managing and counselling advertising agencies when they finally get on board, or digital production studios when they get on board, or even the clients themselves when they want to produce their own content.

Seattle24x7: Tell us about your E-mail and banner advertising products. Have ad agencies been able to differentiate between banner ads and rich media solutions in terms of response rates?
Ferris: Obviously two things need to happen in order to break through the clutter of banner advertising on the Internet. Firstly, you need to have compelling content. That means incorporating rich media. But when you do that with most choices that are on the market today, you narrow your audience to those with broadband connections, DSL or cable modem. The second issue is that the advertising must able to reach an economically viable mass market audience and be targeted to the appropriate audience.

Vmail and Vbanner are productizations of our core intellectual property that are incremental to our business. We’ve looked at different creative approaches in terms of video mail and video banners that religiously yield 35% increases in conversion rates on a control group environment. We’ve done video banner vs. static banner control group tests for King5.com in Seattle. We had 152% increase in clickthroughs on the video banner vs. the static banner. Video is a compelling medium, and it’s been beta-tested for 50+ years.

Seattle24x7: How are you marketing the advertising products?
Ferris: What we’re doing with Vmail and Vbanner is we’re striking value added reseller relationships. We’re not actually going out and selling that direct. Our corporate development group goes out and signs up VAR’s whose core business is E-mail or banner advertising or whatever the case may be. We have partnerships like Bigfoot Interactive, e2 Communications, CaptureQuest, these companies’ sole purpose in life is to sign up clients for Email campaigns. They’re just licensing the Vendaria technology to incorporate video.

Seattle24x7: Have you been testing the platform on different devices?
Ferris: As a centralized distribution vehicle for our client’s content, our mission is to get to as many consumers as possible with the most compelling video message about their brand wherever and whenever the consumer wants to get that information. So any interconnect protocol device will be a Vendaria distribution platform. Today it’s the PC. In the future — we are already working on interactive kiosks. We’ve also prototyped and are piloting wireless PDA’s through the 802.11B standard of 11 Mb to a PocketPC.

We’ve had our videos screening on PocketPC’s through that standard. Also interactive television, C3 mobile, any IP connected device will become a distribution platform for Vendaria. And there’s a host of different partnerships and strategic relationships that we have commenced discussion with and will continue building that position as we go.

Seattle24x7: I understand that a video costs around $2000 to produce?
Ferris: Yes, that’s a clip we create for manufacturers that allows them 60 seconds of point-of-purchase demonstration of their product. They see great value in this price point. They spend $200,000-$300,000 for a thirty second branding commercial that gets broadcast over television with no measurement whatsoever. To come to Vendaria for $2000 and be able to tell their story in 60 seconds to a consumer at the point of purchase who has requested the information and is as qualified as their ever going to find in their product is a home run value-for-money proposition to the manufacturer.

Seattle24x7: What’s in store for 2002 in terms of new product from Vendaria?
Ferris: A couple of things. One may be a new product called Vendaria Vguide which is similar to what you see on our home page where you get to a page and there’s an auto-play video that can instruct you to step through the site in a given flow. We’re talking with some partners about how can apply the technology the whole consumer service experience in a Web site, such as to do returns or checkouts or building your own basketball system by combing a base and a backboard or whatever the case may be. There are applications today on the Internet through the E-commerce shopping experience that requires consumer to read a heck of a lot of text. We think with Vendaria Envision we can humanize that whole experience.

Seattle24x7: You’ve had a $5.2 million funding round in June of last year. Any plans for future financings?
Ferris: We’re anticipating another financing event at some point during 2002, probably mid-point 2002, and that would bring us to profitability, turning the corner around 2002-2003.

Seattle24x7: Thanks, Scott. We’ll have our eyes peeled for new Vendaria video streaming our way.

Larry Sivitz is the Managing Editor of Seattle24x7.