Video Vanguards

Investing in the streaming video trend

In this age of YouTube, all sorts of businesses are offering video clips on their Websites; and business owner Felicia Palmer is following suit. Her business, 4Control Media Inc., based in New Jersey, owns two popular Websites that use the technology. The first, SOHH.com, provides the latest hip-hop news and includes regular columns, blogs, and music samples of new tracks. The site began using streaming video last year and in March, Palmer launched FreshFlixx.com. The new site focuses on videos, including celebrity interviews and movie previews, with movie downloads soon to come.

The real challenge for many companies is how to make money from streaming video. 4Control Media generates revenues from sponsorships and commercials that run prior to the video clips. If traffic to the sites is any indicator, the future looks bright: In just over a year, the number of hits for video clips has skyrocketed to more than 500,000 a month. Overall, Palmer projects annual revenues to more than double this year — reaching $2.5 million, up from $1.2 million in 2006. “It’s all about consumer demand and being able to offer any type of content,” says Palmer.

Of course, she’s just one player in the larger trend. Revenues from Internet video are expected to grow from $1.5 billion this year to $4.2 billion by 2011, according to the Yankee Group, a market research firm.

Such figures indicate opportunities for investors. While they might not be able to buy into 4Control Media — the 14-employee company is private — experts say they can benefit by tapping into companies that serve content providers. Legions of companies are positioning themselves to be the next YouTube, especially in niche markets. Meanwhile, media companies are trying to make movie downloads faster and easier. It’s the companies behind the scenes, those that provide the hardware and software that make streaming video possible, that may offer the best play on the market.

“A rising tide lifts all boats,” says Isaac Green, president and CEO of Piedmont Investment Advisors L.L.C. in Durham, North Carolina (No. 12 on the be asset managers list with $1.4 billion in assets under management). “You are sometimes better off playing the infrastructure names — without regard to which company, which provider, or which platform winds up being dominant. It really doesn’t matter, as long as people are interested in downloading.”

The companies that help build Internet networks are favorites among institutional investors. These companies assemble basic commodity electronic components in a way that gives them a lot of value, says Robert Stimpson, portfolio manager of the Black Oak Emerging Technology fund (BOGSX) at Oak Associates Funds in Akron, Ohio. One of his picks is Cisco Systems Inc. (CSCO), the San Jose, California-based maker of networking products that constitute a good portion of the Internet’s backbone.

“Cisco is a beneficiary of innovation on the Internet,” says Stimpson. “They are the behemoth in the industry and one of the best-run companies.” Oak Associates has owned the stock since Cisco went public in 1990, riding it all the way up and then

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