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March 10, 2009

The Social Video Market Is Becoming More Competitive For Metacafe

Founded in 2003, Metacafe has become the world’s largest social video network, until Youtube came on the horizon. Youtube soon overshadowed Metacafe’s success. Metacafe mainly specializes in short-form original content from new emerging artists to some of the greatest Hollywood celebrities. Metacafe started the evolution of online video entertainment. The way Metacafe works is the user goes on the www.metacafe.com site and can view a whole variety of videos. Above the video menu the user can narrow the search by popularity. The user can decide to look at videos by either the highest rated, most viewed, or rising stars. Metacafe also offers a music channel and Metacafe also offers a subscription service for free. Metacafe’s videos should be no longer than eight minutes. Films that are more than eight minutes long should be submitted to the producer service. Metacafe has over 50,000 raters that rate the videos in the producer service for global viewing. Metacafe does reserve the right to reject videos if they do not follow the rules or if the ratings are not good enough. Metacafe gets its revenues solely by advertising.

In July of 2006, Metacafe secured a venture capital investment of $15 million from Accel Partners with some major participation from Benchmark Capital. In August of 2007, Metacafe was able to raise $30 million in Series C vc funding from Highland Capital Partners. This financing will be used to help Metacafe continue its global growth. DAG Ventures was also a part of this significant venture funding together with Highland Capital Partners. In November of 2008, Metacafe took a major gamble with no guarantees what so ever. Metacafe is to try it out with Wiki, creator of Wikpedia, the online encyclopedia. The joint venture created “Wikicafe, which allows users to edit their videos’ metadata. As of September 2008, Comscore showed Metacafe with 38 million users, trailing behind YouTube. The end result, WikiCafe is good for Metacafe, since more users are using the new service to edit the metadata of their videos.

Metacafe employs 75 people and has a rather large management. Both Arik Czerniak and Eyal Hertzog are the two co-founders of Metacafe. They also both sit on Metacafe’s board of directors. Arik Czerniak stepped down as CEO of Metacafe in 2007 and left the company all together in 2008. In doing so Mr. Czerniak cashed in $2.5 million. Before founding Metacafe, Mr. Czerniak was a pilot in the Israeli Air Force. He holds a BSc in Mathematics, Computer Science and Physics as well as an MBA in Finance and Banking from the Hebrew University of Jerusalem. Eyal Hertzog actually came up with the original concept for Metacafe. Mr. Hertzog has been toying with the idea of creating an innovative music and video sharing site since 1999. Mr. Hertzog is also an accomplished musician and plays the electric guitar. Eric Hachenburg is currently working as Metacafe’s CEO and before coming to Metacafe, he was the Electronic Arts Senior Vice President of EA China. Currently as CEO of Metacafe, Mr. Hachenburg is leading the company’s overall strategy and oversees the day-to-day running of operations. Mr. Hachenburg also held senior positions at Pogo.com, a casual gaming site. Metacafe’s CFO is Michael Strambi. Before coming to Metacafe, Mr. Strambi was the Vice President of Finance of MobiTV. Mr. Strambi has over 20 years of experience corporate finance, being a great asset to the company. Mr. Strambi is a certified public accountant and has an MBA from the University of Southern California and a bachelor’s degree from California State University in Sacramento.

Other members of Metacafe’s management include Erik Smith, VP of Content and Programing; Mort Greenberb, VP of Sales, Allyson Campa, VP of Marketing; David Rice, VP of Product; Alexander Bandel, Systems Engineer; Nissam Romano Sr., Developer; and Scott Bushman, VP of Business Development.

Along with the two co-founders, Metacafe’s board of directors consists of one more person. Richard de Silva is a partner with Highland Capital. Mr. de Silva mainly focuses on digital entertainment and advertising, along with online media properties as well. Mr. de Silva has also focused on consumer payment systems and consumer media technologies. Mr. de Silva is an early-stage venture capitalist plus he also invests in later staged opportunities, such as buyouts and recapitalizations. Mr. de Silva has also worked together with Highland Capital on the vc firm’s funding of NameMedia in 2005 and is still active with NameMedia. NameMedia together with Richard de Silva have been working on NameMedia’s service which gets over 60 million monthly users. Mr. de Silva was a partner of Highland Capital since 2003, and before that he was co-founder and president of SiteBurst, Inc., which is a channel marketing software company.

Even though Metacafe is a fairly large company with great influence on the online media file sharing industry, it does have a few competitors. One competitor is Revver, which is a video-sharing platform. Revver’s service is free and allows unlimited storage for its users. Revver was founded in 2004. Another competitor of Metacafe is Viddler, which offers a service similar to Metacafe. Viddler also offers a free subscription. A third competitor of Metacafe is Dailymotion, which is a video web hosting site. Dailymotion is based in Paris, France and was released just after YouTube released its service. YouTube is probably the major competitor of Metacafe. Founded in 2005, YouTube is a pioneer in online video and users can use YouTube to view different videos from all over the world. YouTube was financed by Sequoia Capital and purchased by Google in November 2006.

Though Metacafe is one of the world’s largest video hosting sites but as YouTube appeared on the horizon, traffic on Metacafe began to take a downturn. YouTube’s publicity has overshadowed Metacafe’s place in the online video social networking industry. YouTube videos have been linked to more websites about different topics. Metacafe, however, is original in the fact that it allows its users who are talented enough to get the attention of Hollywood celebrities. Also the idea of giving prizes to the most talented users is also something original that YouTube does not offer. This provides some promise for this company.