Kate: Bulkley, Media Analyst.

Mike Volpi

For Technology Guardian, October 25, 2007

By Kate Bulkley

There is a pot of gold at the end of the rainbow

Mike Volpi

Mike Volpi joined Joost, the online video service, in June after 13 years at Cisco, where he was chief strategy officer. For his final six years he ran the company's $11bn service provider business which included the routing business, cable and wireless products and the Scientific Atlanta set top box business that Cisco acquired in 2005.

Volpi, an Italian, has spent most of his life in the US. In 2003 he joined the board of Skype, but left after founders Janus Friis and Niklaus Zennstrom sold it to eBay. An engineer by training, Volpi has both an engineering degree and an MBA from Stanford University. He moved to London last month with his wife and two children.

Joost was set up last year by Janus Friis and Niklaus Zennstrom. The video service finally went live at the beginning of this month and to date, 2 million users have downloaded content.

Kate: ebay recently took a $1.2bn writedown on its Skype investment. If Skype can't make the peer-to-peer model work, how can Joost?

Mike Volpi: Peer-to-peer is a networking technology. What Joost is doing is innovating in the visual entertainment delivery business. Skype is trying to do something in the telephony business. We think that peer-to-peer gives us a technological advantage, but we operate on a completely different business model that is ad-supported today and potentially could be pay-per-view at some point. What happens at Skype has no impact to us as a business.

Kate: When it was announced you were joining as chief executive there was some feeling that the company was having technology issues and that it needed an experienced engineer and manager to come in and fix them.

The peer-to-peer part is actually working great. In fact, in excess of 70% of our content now is being served off the peer-to-peer network.

Kate: The user interface has been criticised by some. What is your view of how it looks and works now?

Mike Volpi: The user interface is something we spend an extraordinary amount of time on. What we have discovered is that you can never make everybody happy. I think the longer-term direction is a more customisable model.

Kate: What is your technological USP over competitors like Babelgum, Vuze, Veoh and the others?

Mike Volpi: The most important thing is that it is not about competition. It is about the creation of the market, and quibbling about how many users we have versus someone else is not really relevant. We are trying to create a market and a lot of the things we are doing are experimental. The ability to dynamically insert advertising in the flow which is targeted is quite unique. Our ability to geo-target our reporting information to content owners and advertisers is unique. Our search mechanisms are quite good and the way we display search returns are quite effective. These are the things we do well right now.

Kate: Content owners are cautious about platforms like Joost: they are concerned about piracy, but also about control.

The arguments we are getting is more about, "I get an extraordinary amount of money from my cable and satellite and free TV platform customers today so how do I know that when I put my content on your platform that I will get more or as much money?" So, I would say it is more of a "how do I manage my business model" concern as opposed to worry about stealing these days.

Kate: So the BitTorrent worries about peer-to-peer technology are over?

Mike Volpi: Well, the only injection point into our cloud is through us and also we have made it so that no one person stores an entire piece of content on their PC.

Kate: The business model is ad-supported. The big studios are willing to do video on demand and pay-per-view deals. Many are also selling to iTunes. For the studios this is an easier business model because they can see the money

We don't disagree that pay-per-view is a viable model. The reason we chose to get into ad-supported is because you don't have to worry about PayPal accounts or credit cards, you just go and watch. And you can garner a lot of information about the user, which allows you to make your targeting more effective.

Kate: Where are you now in terms of content and is it enough?

Mike Volpi: We have a little over 3,000 hours of content, 250 content owners, 15,000 shows and 250 channels and it grows very quickly. We are trying to do a range of shows, such as top series like the CSI franchise, which comes 24 hours after it airs in the US. And we have Major League Baseball, which comes on three or four hours after the game is over. And we also go all the way to the other end of the spectrum to stuff you've never heard of, like the gay Mexican channel and motocross.com. The truth of the matter is we are all in the experimental stage. CSI works and Major League Baseball works; and then we find all sorts of things that somewhat surprisingly works as well.

Paramount Pictures gave us a film called Clockstoppers that most people haven't heard of but it has been one of the most highly viewed on Joost. We are finding that people respond differently depending on where people are, so we see different demand from Latin America and the US, for example.

Kate: What is the tipping point to make your business work?

Mike Volpi: We need content owners who are willing to take a bit of a risk with us. So Turner, Warner Bros, CBS and Viacom have all been willing to say, "OK, we'll roll the dice and we'll see what happens", and others have been more conservative. Our job is to execute really effectively with the people who are on board and use that to convince others. The CPMs are good and the user base is growing and that's what they care about. We have to get them comfortable that there is a pot of gold at the end of that rainbow.

Kate: Many content owners seem to be setting up direct-to-consumer offerings such as News Corp and NBC launching hulu.com. Why do they need to create another gatekeeper or aggregator when the internet makes it so easy for them to go direct?

Mike Volpi: The analogy I like to use is Amazon. When a user goes to buy a book they want the whole bookstore. They don't want to have to go to three book sites. I think generally the internet lends itself to those models where users are confident with what they find there and with the user interface and with the trust of that brand. So I do think that aggregation models work.

Content companies might find that getting users to their sites is more challenging than they might think. I watch TV shows that I don't know who the broadcaster or the maker is. And also some of the competitors to News Corp may have a hard time joining hulu.com, whereas Joost is a kind of confederation.

Kate: Joost doesn't have a lot of UK content. What's the problem?

Mike Volpi: Candidly, we haven't been as successful attracting content in the UK as we have been in the US or other parts of Europe. Conversely, we have strong UK viewership. There are two things about UK content that are important. Because UK content is in English, it has international appeal and I think it is underexploited. So with a delivery platform like ours they can reach international audiences. The second thing is we have to let this "do it yourself" approach play out. At some point hopefully [the UK content providers] will put some content on Joost.

Kate: There has been a lot of hype about Joost because of Niklaus Zennstrom and Janus Friis. Where are you now?

Mike Volpi: Hype is a wonderful thing, but you need to build a good underlying business. So we'll take it and maybe it will encourage some content owners to try working with us, but our objective is to build a really good business and once we have the metrics and the numbers it will speak for itself.

Kate: And profitability?

Mike Volpi: It depends how aggressive we want to be. There are a million initiatives we could take: we could do live, we could do a kids' programme, do pay-per-view, penetrate China and Japan.

Kate: How aggressive do you want to be?

Mike Volpi: Just aggressive enough to make our investors happy.


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