Vevo Boasts $150 Million in Revenue, Eyes Potential Partnership with Facebook

by Kyle Mammarella

Rio Caraeff, CEO of Vevo, the online music video service launched by Universal Music Group and Sony Music Entertainment in 2009, announced Tuesday that his company pulled in $150 million in revenue in 2011.

“In the last year alone we’ve generated over $150 million,” said Caraeff at the AllThingsD Dive Into Media conference.  “We’ve paid the labels about $100 million (over the last 2 years).  so we’re making money.”

Most of its audience comes from YouTube, where Vevo is one of the most popular channels.  It generates its revenue from advertising.  Because it streams high-quality music videos, Vevo is able command advertising rates that are on par with broadcast television programming.

This announcement comes amid rumors that Vevo will be dropping its partnership with YouTube and its parent company, Google, and moving over to Facebook.  Preliminary talks are reportedly underway, with Vevo meeting with the social networking giant at least twice.

While Vevo’s contract with Google is expected to last for at least another year, Facebook could be hoping for a deal similar to the one it has with Spotify, where Facebook acts as the distribution platform and Vevo provides the service to drive user engagement.

Facebook’s videos are not a prominent feature on the site and they are looking to improve their video engagement.  One of its goals is to keep revenues growing as it saturates key markets by keeping visitors on the site longer.  Over the past four years, Facebook’s user base has grown from roughly 50 million to 845 million, with users spending more than 9.7 billion minutes on average per day on the site.  Since they have already exhausted much of the supply of highly monetizable first world users, Facebook aims to make more money per user.  By integrating free music listening in the form of streaming Vevo videos, they would be taking the first step in the right direction.

On Wednesday, Facebook filed to go public and raise $5 billion.  It is on track to be the largest Internet initial public offering ever, with analysts noting they could be aiming for a far greater offering that would value it near $100 billion.  In recent months, they have rolled out new partnerships with companies like Ticketmaster, and is also said to be designing its own mobile phone.  Still, there is no real compelling Facebook-driven music service.  Expanding their streaming video service with Vevo could be a key component of their profit matrix, making the company’s stock more attractive to future investors.

Vevo’s popularity has boomed since it launched two years ago.  “From a volume perspective our growth has been tremendous,” said Caraeff.  “We had 300 million global views per month when we launched.  Today we’re seeing 3.5 billion views per month.  That’s about 42 billion views per year.”  They also have plans to expand rapidly in 2012, pushing into the mobile sphere and launching an Xbox application.  “The future of the music business is allowing billions of people around the planet to access music experiences,” Caraeff said.

Vevo continues to be an influential tool for artists.  In particular, its LIFT program, launched in January 2011, has given new and developing artists direct access to fans.  For eight-week blocks through the year, VEVO puts the scale of its platform behind one artist, which is selected from label submissions.  Each artist selected creates 10-20 original and live exclusive content pieces for the VEVO audience.  The program is sponsored exclusively by McDonalds.

The LIFT program seen significant impacts on social media engagement, sales and radio, driving consumer engagement.  One artist in particular, Jessie J, saw a surge in social media engagement after she started working with Vevo.  Prior to LIFT, she was virtually unknown outside of her native U.K.  Within eight weeks, her video views grew from 6 million to over 100 million.  Her social media following also expanded to more than 1.5 million fans, up from 85k fans from Facebook and Twitter combined.  Seventy percent of her total views now come from outside of the U.K.  A comScore survey measuring how fans discovered Jessie J found that nearly 60% were introduced to her through Vevo.

Should Vevo make the move to Facebook, it could mean fewer roadblocks from the music industry. Though Google did launch its own music service in November, it was delayed time and time again due to resistance from major record companies, and it still lacks licensing deals with Warner Music Group.  By helping to consolidate where users view and listen to copyrighted material, and allowing Facebook to provide greater audience viewership numbers, the pairing could ease contractual negotiations with record labels.

It is unlikely that Google will go down without a fight.  Vevo has enjoyed a longstanding and profitable relationship with the internet giant.  Whether they choose to part ways with YouTube remains to be seen.

Facebook and Vevo have not officially commented on plans for a partnership.

Kyle Mammarella is a New York based artist manager and music enthusiast.