Taken from : http://www.macnn.com/reviews/overlay.tv.html

Overlay.TV

February 27th, 2008
Overlay aims to be the video ad platform for the web and the world.

stepping inside and the inspiration for Overlay.TV


On visiting Overlay.TV's office in downtown Ottawa, Canada, you'd be forgiven for thinking you'd somehow visited San Francisco by mistake: If it weren't for the view of snow drifts outside the massive main window, the open, modern loft space would be perfect for a northern California startup instead of the cubicle-dominated Canadian government town. It's certainly a refreshing break from the monolithic technology firms that dominate the city, such as Adobe (which sits virtually next door) or Corel. The first things that greet most visitors to the office are a flat-panel HDTV and a couch, not the more conventional lobby seats and receptionists that fence the workers away from the guests.



Overlay.TV's Chief Architect, Tyler Cope



The main workspace (visible immediately on setting foot inside the office)



That relaxed, people-first attitude seems to extend through the company's philosophy and its reason for being. Born roughly a year ago in early 2007, the company was the fruit of co-founder and Chief Architect Tyler Cope's experience with his wife's TV viewing habits with a PVR (personal video recorder). He noted that Mrs. Cope, like most PVR owners, was determined to skip the commercials that break up most shows but would still be interested in products she saw in the actual programming. She was open to investigating a product, but only when it was something she saw in the show -- and only on her terms.

To Cope and company chief Rob Lane, that was a sign that advertisers don't really know what works, especially in the world of Internet video. After all, says Lane, no one wants to be pushed a toothpaste commercial while watching a review for a digital camera, but it happens all the time in TV or on many web video services. These company heads believe the only surefire method to solve this dilemma was simply to open the gates. Let content hosts choose how obvious or subtle their advertising may be; give as much control to users as possible, as only they know best what they're interested in.



President and chief executive Rob Lane



This resulted in Overlay's main product: a free video ad service where most any site owner can make money from videos without the usual need for a large (and expensive) viewer base to maintain ad deals, or even the need to sign those deals in the first place. Users can, in theory, simply start up a video blog and begin making money. Hessie Jones, the firm's marketing director, notes that the inherently user-controlled format can create a sense of relevant advertising among even relatively small peer groups, who are more likely to click if they know the advertising was chosen with care. And in some cases, that may involve no advertising at all: unlike Google's AdSense for video, the Overlay.TV system allows users to switch off ads entirely if they don't want to be pressured into a sale while watching the latest Lily Allen music video.



Watching a Lily Allen music video with overlay ads for iTunes, MySpace



There's an upside for advertisers as well, the company claims. While a casual observer might think that sponsors would turn pale at the thought of viewers shutting down their ad spots, many of the more than 600 affiliates already part of Overlay's aggregation service (including Amazon, Apple, and Wal-Mart) are said to be tired of resorting to banner ads and other of web commerce. They want users who click because they're interested in buying, according to Lane, and not just casual clicks or impressions.

The appeal to both camps would quickly become apparent in the company's demo. in the flesh: practical use and hard revenue numbers

For all intents and purposes, Overlay.TV is iMovie for profit-minded bloggers and webcasters. After signing up, a bookmarklet lets users "grab" any video from many websites, including MySpace and YouTube, and put it into a timeline editor without ever leaving the host site; it's possible then to scrub through the video and drop in clickable overlay points that last as long as the user wants, whether it's three seconds or three minutes. In fact, just about everything is editable. The overlay can be as inconspicuous as a small translucent circle or as blunt as large product images or animated icons (axes, hearts, and robot heads were the examples here). Titles are also an option. For larger affiliates, much of the content for an ad can even be pulled automatically from the product page. Since Amazon's layouts are almost always the same, for example, images and text can stem from the online shop's own work rather than being filled out by hand.



Editing a video overlay directly from YouTube



Picking an icon to represent an overlay



In our demo, it was also evident that setting up ad links would be relatively easy, if not pain-free. That same bookmarklet can also be used to create a new "product" -- essentially, a link for a specific item -- from most sites that participate in the program. In many cases, it's possible to simply search for a relevant product and find a whole set of ready-made affiliate links to use. If the actual product is more obscure, it's often possible to pull content just by visiting certain product websites and triggering the bookmarklet.



Creating a new product (ad link) directly from Amazon



If there's anything challenging to using Overlay.TV, it's the nature of a user-chosen ad system: since users can't just rely on an automated system or a dedicated ad network to supply ads, each video needs those extra minutes of time before it can be ready for the website. Understandably, the bookmarklet also can't be used to create new affiliate links directly from the iTunes Store; a search is usually the only practical option. One can also argue that the ability to auto-detect information from Amazon and other major affiliates might suit less-than-enthusiastic video editors, who might overlook links to smaller shops in favor of the easiest solution.

However, the Overlay system goes to great lengths to avoid that level of bias through its secret weapon: a side-by-side comparison of payout plans. While the service's beta stage meant that payment plans weren't immediately visible (all proceeds go to charity until Overlay is completed), both Cope and Lane noted that a product search will show the possible income from each search result, including what's required to generate a profit. If viewers are more likely to actually buy the product based on the video, such as when they're watching a review, it could make more sense to choose a small affiliate that provides more revenue for the actual sale than a larger affiliate which focuses on just site clicks.



Searching for existing ad products; note the "payment" column



The real question, of course, is whether clicks and sales translate to real money. According to Lane, the combined money given away to both a user and Overlay.TV from CPA (Cost Per Action, such as a sale) ranges between 5 and 12 percent depending on the affiliate and the product in question. As much as 50 percent of that revenue is taken by the user. That's certainly less than a direct ad deal, but is at least competitive with some affiliate plans: a similar, image- or text-only Amazon deal often nets between 3 and 7 percent, which is higher but not enough to necessarily outweigh the flexibility of the Overlay option.

Moreover, the true value of Overlay may not just be in whether it competes well with traditional online ads, or even that it offers video ad revenue in the first place. As I found out soon enough, the real advantage may be in where Overlay goes in the future, which could quite possibly include your cellphone or a networked media hub. initial reactions and the future

Being an Ottawa-area startup, Overlay faces a relatively uphill battle for recognition, but from official reports appears to be on the right course. The initial reaction was "huge" and gave a solid base to work from, according to Lane. This was partly helped on launch day by This Week in Tech's Net@Nite podcast, which highlighted Overlay.TV literally on the same day as the service entered its public beta. The number of affiliates is also said to be growing daily and is adding both major players as well as local shops.

And while the service is less than two weeks old as of press time, the distinct possibility exists that the Overlay.TV website could serve as a portal if it catches on. While cautious, the executives said it was "not out of the question" that people could ultimately begin visiting Overlay.TV first as a form of hub, even if the actual videos themselves are hosted by separate providers (primarily for copyright purposes).



The front page today -- something likely to change in the future



Regardless of what happens, the service is bound to diversify quickly if it succeeds. The ease of signing into the Overlay service is likely to be one of the first changes. Today, users either need a separate account or else the willingness to install a Facebook web app. That's likely to change and may include Google's OpenSocial cross-site web app platform, though letting users sign on through that service will have to wait both for a more finalized OpenSocial service as well as signs of a warm market reaction.

Overlay.TV likewise isn't bound to running in Adobe's Flash web browser plug-in. As Overlay's service is ultimately a back end, the front end can change relatively easily, Cope says. Although nothing is determined at this early stage, a Microsoft Silverlight version might be possible, as might a version for Flash Lite 3, such as Nokia's Nseries, are prime candidates for a mobile version since they can already play Flash video from many websites. The possibility also exists for Internet-based video devices that have no support for Flash or Silverlight at all: a networked media hub (such as the Apple TV or Monsoon Hava) or even a data-ready cable TV network could let viewers point to, view, and possibly buy a product seen in the middle of a TV episode or a downloaded video.



Saying goodbye



Whether the concept of user-chosen ads works out well enough to result in such widespread exposure is far from certain; an official release may need weeks or months before the service is completely ready. However, even a brief visit to Overlay's offices made it clear that there's at least far-reaching ambition at the company that doesn't often exist at other Web 2.0 firms, whether they're in Ottawa or nestled in a hotspot like Silicon Valley. If this company succeeds, it hopes to be the dominant force for Internet video ads -- a potentially vital role as faster Internet connections render one-way video obsolete and make online video the norm.

Overlay.TV intends to build the "user-generated platform of choice," Lane says.
Pros
- Anyone can advertise on their videos: no deals needed.

- Users pick how and who they advertise, and have an easy time doing it.

- Viewers have as much control as they want over ads.

- Doesn't need a custom app.

- Optionally ties into a FaceBook web app for sign-ins.

- Likely to expand to cellphones, media hubs, and non-Flash platforms.Cons
- No automatic ad creation for heavy-duty users.

- Auto ad creation technology may favor big advertisers over independents.

- Revenue cut isn't as large as for a direct deal.

- Still in a Flash-only public beta (for now).