1. Executive Summary
While watching online videos together in college, the Cliq co-founders Ross, Ria, and Lindsay discovered that during the advertisements that were playing, they would start talking to each other, get distracted on their phones, or would get up to take a snack break. Advertising time is becoming break time for many consumers of online videos, making traditional online video advertising easy to ignore. Cliq is seeking to solve the dual problem for products that are advertising in online videos as well as streaming platforms such as Netflix that are missing out on traditional advertising revenue. Cliq is looking to build a relationship with streaming services, ideally Netflix, and strives to become an integral part of their business and become acquired.
1.1. Mission Statement
Cliq is striving to redefine TV advertising and bridge the gap between streaming services, products, and consumers by implementing an innovative, interactive product placement advertising software into streaming services.
1.2. The Company and Management
Cliq was co-founded in 2017 by Ross Barreiro, Ria Singh, and Lindsay Stecklein. All three are graduating seniors at New York University’s Stern School of Business concentrating in Marketing and Management. Ross is the CEO of the company, Ria is the Head of Business Development, and Lindsay is the Head of Marketing.
1.3. The Product
Cliq isn’t just a tool for traditional product placement advertising. Cliq gives the viewers a fast track to more information about the show they are watching on a streaming platform, ideally Netflix. If consumers want to learn more about a specific product, place, or clothing item, they will be able to save items for later and learn more about them while also having the option to instantly purchase. The interactive software overlay will be integrated into shows, with the option to pause the video and mouse over something to learn moret. This ensures that the video streaming service won’t lose viewers since the advertising won’t guide viewers away from the page immediately, and consumers can tailor the advertising to learn more about and buy products they actually want. A prototype of what Cliq’s interactive software overlay and cart feature landing page will look like are including in Figure 1.
1.4. The Market
Digital advertising spend by the end of this year in the U.S alone is expected to rise by 15.9% from last year, equivalent to $83 billion in advertising revenue (Johnson). Additionally, the market for product placement revenue is also increasing and is expected to reach $11.44 billion by 2019 (Muzellec). Cliq could not be launching at a more advantageous and exciting time for online advertising. Majority of the market share for online advertising as a whole is dominated by the big players Google and Facebook (Johnson). However, there is a need for innovative advertising when it comes to online advertising in videos, and Cliq can quickly become a key player in the space.
1.5. Competitive Advantage
Cliq’s main direct competitors are The Take AI, Amazon Flow, and Google Cloud Vision API. The Take AI focuses on the use of artificial intelligence to understand and identify people and products in videos, and creates scalable insights from complex content. The Take AI is the most similar to Cliq because they target video content creators and curators, but Cliq focuses more on the interactive part of advertising that will allow consumers to directly purchase items and learn about the show. Amazon Flow targets product consumers by identifying objects in reality and not in videos through a free downloaded app. Therefore, Cliq is differentiated as an interactive software overlay in videos rather than an app finding objects in reality. Finally, Google Cloud Vision API targets developers to analyze images and isn’t integrated in videos. Therefore, Cliq can take advantage of the growing online advertising market in videos and reform the space.
1.6. Financial Projections
As an innovative business in a developing industry, our start-up costs in Year 0 are estimated to be around $3.5 million. Our estimated total costs are $265,000, and in Year 1 we expect to break even and turn a profit of about $2.66 million. Financial projections and calculations can be found in Figure 3 onwards in the Appendix.
1.7. Risks
Mainly, without a patent, Cliq’s idea could be stolen by software developers that hear about the specifics. Additionally, as Cliq builds relationships with streaming services, the services could decide that they don’t need an outside company to do the work for them and instead might decide to develop the same technology internally. In order to move forward, Cliq is looking into patent protection and has key milestones and an exit strategy planned for the future of the company. Another risk is our domain name. Ross conceptualized our name, and we searched the US Office of Patents and Trademarks, finding it open. Unfortunately, the domain name cliq.com is taken so we will be launching our website as cliqflix.com.
2. Market Opportunity
The market for online advertising is increasing in our digital day and age. Spend on digital advertising by the end of 2017 in the U.S is expected to rise by 15.9% and generate around $83 billion in revenue (Johnson). In contrast, however, digital advertising embedded in online videos is becoming more stagnant and easier for consumers to ignore. According to TechCrunch, around 63% of Americans ignore Internet ads (Wauters). Additionally, ad blockers and simple diversions like getting a snack or playing a mobile game make it easy for consumers to completely tune out online ads placed before or during a video. For more effective advertising, it’s been found that personalized digital ads resonate more with 80% of Millennials (Elkin). Evidently, traditional online advertising in videos isn’t working well for companies and brands, and they need to be more innovative in order to recapture the attention of consumers.
On the other hand, there are a few financial problems for online video platforms with original content and a strong subscriber base as well. Netflix, for example, faces a few problems when it comes to making money. Primarily, Netflix needs to create original content in order to differentiate itself from competitors, which can get quite expensive. For Netflix, original shows and movies can cost anywhere from $30 million to $90 million to produce (Toledo). Secondly, streaming services like Netflix face the problem of freeloaders. Although they have a cap on how many devices can be streaming content, users may share their passwords with friends or family to save money. Finally, streaming services like Netflix are missing out on a lot of traditional advertising revenue. Around 79% of people prefer paying more for services like Netflix to avoid dealing with ads, making it difficult for these services to make money from advertising (Toledo).
With constant new technologies and online video content, there should be a way for video platforms like Netflix not to miss advertising revenue and for brands to be able to advertise in a less disruptive way. The market opportunity for Cliq lies in the market for product placement revenue. Product placement is a more organic form of advertising that allows brands to be showcased and displayed within the content itself instead of in a separate, disruptive advertisement. Product placement revenue in the U.S was $6.01 billion in 2014 and is expected to increase up to $11.44 billion by 2019 (Muzellec). Additionally, major brands are looking into product placement investments in media content that cater to a younger target audience; a demographic that platforms like Netflix have captured already. Although Netflix has around 89.09 million paying subscribers, they still need more to increase capital and continue investing in captivating, original content to stay relevant in the market (Snider). Product placement is a viable investment for brands looking for more exposure and for streaming platforms like Netflix to generate more capital. Cliq provides an interactive product placement solution to integrate brands and original content on a streaming platform like Netflix.
3. Solution
We have two main product offerings that will help revitalize the way consumers, content producers, and streaming platforms alike think about advertising. The first is an interactive software overlay that will be embedded into the streaming services current platform and will provide for dynamic product placement to occur. This software overlay would live on the pause screen of the streaming platform. The relevant products, places, or people would be greyed out so as to make them stick out to the viewer. Then, when moused over, it would offer a quick tidbit of information with the ability to save the item for later. Every saved item would be placed into a “Saved for Later” tab on the Netflix platform where users would then have the ability to read more information about the person or place and follow a link to a website where they can purchase any products they have saved. Deciding which items make it onto the platform would be up to the individual showrunners, content producers, and brands to decide depending on the product placement deals they are signing and which storytelling elements if any they wish to insert. Our team of consultants would, however, work with each of these parties to ensure that the strengths of both the streaming service and our platform are leveraged, all while keeping the integrity of the show at the forefront of all negotiations since the show’s ability to attract a loyal audience is key to the success of all parties involved.
Given all of this our service adds obvious value to the content producing and video on-demand value chain. Content producers are being offered a new and exciting way to tell the unique story of their shows to the digitally-inclined viewer. Streaming services have the opportunity to receive a steady form of revenue in the form of increased product placement deals. At this time they engage in product placement on a very small scale because they simply do not want to develop the expertise or dedicate the labor hours to doing so, but in this case we would offer to take over that responsibility for them in so far as it pertains to our platform (we would not be sourcing traditional product placement deals that don’t leverage our platform).
Cliq also generates considerable value for the consumers engaged in this value chain as well. They are given more personalized advertisements that they can opt-in to. The content they are watching will become more engaging as more showrunners and producers opt to include the storytelling elements through Cliq. Our platform in general, whether it be through the storytelling elements or the organic product placement, will serve to integrate the real and digital worlds making video content more “real” to viewers. Finally, we will all be able to satisfy that urge to dress like the character in our favorite show or cook that dish we saw on Chef’s Table and you’ll be able to do so almost immediately with Cliq.
4. “Secret Sauce”
Cliq is unique in that we combine relationships with engineering. Our interactive images are handpicked by producers and brands themselves, with the overlay implemented in-house by Cliq. No company has yet provided a way to connect platforms, brands, and consumers in such a seamless way. With our approach of being an intermediary between the production side of producers/brands and the consumers who will be watching the shows and utilizing our interactive overlay both will get an attentive, customized experience. Nobody in the market is currently handpicking and coding the images for consumer facing platforms. We would be the standalone with this offering. Our direct consulting and relationships built would make us an invaluable asset to brands and producers, and we would be able to track user data through consumer's’ interactions with our platform. Being able to see how their products are performing through product placement and the best ways to utilize product placement would have a huge impact on brands.
Because our product is completely developed through engineering rather than artificial intelligence, no detail goes unnoticed. The products, people, and places featured with Cliq overlay will not merely be just recognized by an artificial intelligence means, but will be chosen by brands themselves. Every clickable item will have been carefully considered and understood for the best outcome on all ends of the system. Our personalized consulting and engineering with each client provides them with the service they want and need. At the beginning, to ensure that we are producing a high quality product for consumers, brands, and content producers alike we will only be offering these services to Netflix originals, since that is the streaming platform we are looking to partner with.
5. Business Model
We plan to capture revenue in three major ways: a per-season licensing fee charged to each show, a commission on the product placement deals that are made with our platform in mind, and fees charged per thousand impressions.
The licensing fee is currently estimated to be between $1 and $5 million dollars per season per show depending on how intensive they want to integrate with our platform, the production budget of the show, viewer base, etc. While this fee may seem steep we find that it is reasonable when you consider that a standard product placement deal for multiple episodes on primetime network television can cost anywhere from $3 to $10 million dollars and series long deals can be in excess of $50 million.
Due to the projected increase in advertising effectiveness for brands and product placement revenue for showrunners our platform promises we felt it was only right that we also take a small portion off the top of any product placement deals to be carried out through ou platform. The percentages are small–10% if the agreement is forged separate from us and 20% if our consultants help to source the contacts–because we want to be sure that the value we are providing to the parties greatly outweighs any revenue we are siphoning. We do believe that saying our platform will increase either advertising effectiveness or product placement revenue is an extremely conservative assumption to make.
Finally, we are also looking to capture some value from the traffic that our platform will be funneling to other websites or marketplaces. This would come in the form of a fee per thousand impressions. Traditionally, platform which are significantly less sophisticated than ours charge $10 per thousand impressions. Thus, we would be looking to charge a premium of $40 per thousand impressions. However, because of the unique functionality of our platform, instead of views the impressions would be based on the number of “saves for later” that users make. Furthermore, the streaming service that our software is integrated into would have the right to the majority of the CPM revenue because it is mainly their user base that would be providing the volume needed to make this endeavor economically viable. Thus, we would only ask for a 30% cut.
6. Management Team and Advisors
Cliq is a company built on multiple relationships over the past four years. We have been classmates, coworkers, and friends for four years, allowing the idea of Cliq to develop along with us. The three founders are soon to be graduates from New York University’s Stern School of Business, with concentrations in both Marketing and Management. This academic background has built the key skills necessary to creating and representing a new company, while each founder has different focuses, professional histories, and strengths.
Our CEO Ross Barreiro’s knack for vision melds with his ability to understand and solve any issue. Ross’s years of experience in consulting with Ernst & Young have made him an expert at understanding industries and identifying opportunities. Ria Singh, Head of Business Development, can close any deal and hone in on new ventures, seeing them where no others can. Her professional experience with Bank of America Merrill Lynch and CitiBank have proven her strength at launching new products and aptitude for client facing projects. Head of Marketing Lindsay Stecklein is always ahead of the curve when looking for ways for Cliq to reach potential users. After working at Epix and in digital marketing for IBM, she has crafted a visionary perspective of both television, the digital world, and to grab consumers’ attention. With all of our respective backgrounds, our personalities and skills complement each other to create a team that will be a driving force in this new form of ad space.
We realize that while our team is strong in drive, selling ability, and vision, we are lacking in strong financial skills and software engineers. We are seeking both a CFO and a CTO, as well as a well-rounded team that can help build out our platform. For Cliq to succeed, we need a team to build the interactive advertising service infrastructures. We are currently seeking online engineering as well as accountants and financial consultants to control our revenues and track our profits. These key aspects of the team will be crucial to its success, because without engineers and financial advisors, we will not be able to fully function. Thus, we will be recruiting a team of engineers as well as individuals for our finance department.
Cliq is ready to revitalize online television advertising, but can’t do so without strong advisors that have knowledge about the industry we’re trying to break into. Our first advisor is Evan Shapiro, the Executive Vice President of Digital Enterprises for NBCUniversal. Evan has a handle on not only a traditional television source like NBC, but is forward thinking and constantly innovating the entertainment spectrum. He has been a part of the new path being forged between television and digital medias, and will be giving us guidance with the idea. We also have Akash Nandi who works as a Content Planning Analyst at Netflix. He understands the relationship content has with consumers, and can help forge a relationship with Netflix, our primary focus for a partner. Akash is forward thinking and has the relationships and information that could help us succeed as a new form of advertising.
7. Marketing Plan
Product placement in and of itself has been a marketing ploy for years. We are simply the ones to revolutionize and modernize it, making it instantaneous. As a business to business service, Cliq will be acting as a service operating between products, places, public figures, and streaming platforms. Cliq is seeking to exclusively partner with one streaming service, namely Netflix at this stage. We have identified Netflix as a frontrunner in shaking up the television industry. We are open to other options, as in the startup world anything can happen, but we believe a partnership with Netflix would be strongly suited for our needs and theirs. Netflix is always seeking new ways to make money and fund their top notch content. This strategic and exclusive partnership leverages our groundbreaking service as a benefit that only Netflix would receive. Once partnered with a streaming platform, we will be focused on marketing, selling, and building relationships with brands and film producers. We need to be discovered by these producers and brands for them to utilize us, which we will deploy multiple methods to get onto their radar. We will use SEO marketing techniques for companies and producers, as well as social media targeted ads for those that have shown that they work within these companies. We will be reaching out to the marketing departments of brands, forging relationships with them and showing them what we can offer for them.
Finally, once these relationships have been created, we aim to promote the new feature on the chosen streaming platform, hopefully Netflix, once it is implemented onto the site. We’ll open up a beta version of the service and see how users interact with it, collecting data on user activity. Once data has been collected, we’ll revamp the system and roll it out for all platform users. The new service will be promoted on the platform’s main page so users can’t miss the new feature. We’ll continually be collecting data on how users are purchasing and interacting with the service so as to further understand and help brands effectively sell themselves.
8. Competitive Analysis
Cliq would be the first mover to provide a service like the one, so it’s important for us to move quickly. There are competitors in our realm that have different offerings, but the idea of interactive content is nothing new. Companies have tried to implement this idea with video content, but never previously with a partnership with a streaming platform such as Netflix. What is important about beating the competition at this stage is showing our capability and building these partnerships with brands and a streaming platform, as this space is there for the taking as of now.
Direct competitors that closest mirror our competencies are The Take AI, Amazon Flow, and Google Cloud. (Figure 2) The Take AI is a new startup that uses artificial intelligence learning to gather data about video content. The artificial intelligence aspect of it is a very good idea, and the machine learning that it offers is fantastic. What it doesn’t offer is our intermediary services. They target video content creators and curators rather than acting as a go-between for platforms and producers or brands. It is mainly used to find video content insights. The company is currently very small with little information about who they are, and pricing is only available upon request. Amazon Flow also competes with our offerings. Amazon Flow is a free download app that can be put on smartphones that targets product consumers. It is more of a virtual reality app that recognizes products that consumers show to their phones, giving them information about the product to identify objects in real life. It offers retail based identifications, similarly to our concept. However, it’s a free downloaded app and interacts with the user’s “real world” rather than their video content, giving us the upper hand in our area. Finally, our last close competitor is Google Cloud Vision API. It is one of the many Cloud services that Google offers, and this product is meant mostly for developers. The pricing varies by usage, with 1,000 units a month being free and each service extra after. The usage of it is to analyze images, but is not integrated with video platforms. Video analysis is a service that is developing, but Cliq offers a unique service with an intermediary position between video content and brands/producers, which has not yet successfully been pursued.
Cliq’s indirect competitors are comprised of both contemporary advertising channels and traditional product placement. Product placement itself can be expensive, and often a gamble. The Superman hit, Man of Steel, received $160 million in solely product placement funding. (Suggett) This staggering number shows how strongly brands want to display their products, but brands would be much more likely to make a profit from this type of advertising if viewers could immediately make a purchase on a product, or be prompted to make a purchase when pausing a show or movie. Contemporary advertising channels like Facebook and YouTube have many sponsored ads that play and offer easily clickable purchase options, but are seen by users as “ads” rather than feeling like they are making the choice themselves to purchase, which they would if putting a product from a show into a cart by choice. Cliq offers the upper hand to brands because it offers a quick turnover.
9. Projections
Admittedly, our team found it quite difficult to model out the financial viability of our business due to the fact that this technology is so unique and the industry we are looking to enter rarely ever releases financial information. However, here are some of our base assumptions followed by some figures showing our revenues and expenses broken down by episode as well as yearly totals:
Our start-up costs are estimated to be around 3.5 million dollars in Year 0 as we hire sophisticated software engineers to build our platform from the ground up. This cash outlay includes labor and equipment. The team will be working out of a spare bedroom in an apartment currently occupied by the CEO. In Year 0 we are assuming that we can land a single contract with Master of None to work on their third season which will be entering production shortly. However, we are only grossing approximately $2.9 million dollars in revenue thus we won’t have broken even. All marketing and sales efforts will be carried out by Ria and Lindsay who will not be taking a salary at the time.
Entering Year 1 we are being conservative in assuming that we still only have 1 show signed to our platform. However, our costs drop dramatically as our platform has been completely developed and we simply only need maintenance. Our model projects one new software engineer to be hired for each show we sign to our platform and one new members of sales staff (our product placement consultants) to be hired for every 2 shows added but we have hired one of each at this time. We also accounted for each individual having a computer, renting an office space outside of Manhattan, and paying for internet access. Thus, our total costs are around $265,000. Using the same revenue model from Master of None we will be making approximately $2.9 million dollars meaning we will break even and turn a profit of about $2.66 million dollars in Year 1. The rest of our growth assumptions can be seen in the attached model. We attempted to be as conservative as possible with our figures because, while we understand this is a growth case given the industry and the product, we want investors to be sure of the economic viability of our business, even if only a few shows are willing to contract with us.
10. Milestones, Risks, and Exit
Given the innovative nature of Cliq and the uncertainty that lies ahead with building relationships with the right streaming services and the growing interactive product placement industry, Cliq faces a few risks in the near future. Primarily, since the founding team is more experienced in business and marketing and is searching for a technology team, the software coding and expertise needed could be a potential risk. If Cliq outsources the software developing work as planned, there’s a huge risk involved by telling someone on the outside of the business the key components of Cliq and how specifically to code the product. Without a patent on the technology, the idea of Cliq could be stolen and developed by someone else and sold to streaming services. Additionally, if we pitch Cliq to streaming services as planned, they could decide to implement the idea and integrate the interactive product placement software themselves. Although it may be pricey, Cliq still runs the risk of services like Netflix embedding the idea into new content with their own developers. In order to mitigate these risks, Cliq is looking to receive a patent for the idea and is currently discussing with advisors as how to proceed.
That being said, Cliq has big plans for the future. As of now, we have a dedicated, enthusiastic team that is ready to rise to the challenge, and our plans for June 2017 are to hire a CTO and a CFO. We are seeking these two key leaders to help push us further and build on the strengths that we currently do not possess. We’ll outsource our Software Development so the framework of our service can efficiently be created. We also will be building relationships with streaming services in June, ideally Netflix. After creating this relationship, in July we then plan to hire a VP of Sales, VP of Content Partnerships, and a full-time in house developer so we can constantly be upgrading. Come September 2017, we intend to have our product prototype finalized, and thus pursue a licensing agreement. In January 2018, we will then partner with Netflix Original shows and movies planned for 2018 and 2019 launch, and all Netflix Original content will have Cliq overlay on its products. In February 2018, we intend to work with previous Netflix Original shows to retroactively identify product placement, and overlay Cliq into old shows to make our service more prevalent. Our ultimate goal is to be acquired by Netflix in the end and sell our service, as we see Cliq being something that would best be owned by Netflix themselves, and we think we could create a great deal of value for the platform. We know that we would be a valuable asset to Netflix, and that we would best be utilized as a division within ideally Netflix’s platform over time, thus our ideal endpoint is acquisition.