Dailymotion Seeks U.S. Partner to Help Cut YouTube's Lead

By FOXBusiness

French video-sharing site Dailymotion is searching for a U.S. partner to acquire roughly 50% of the company as it attempts to gain ground on rival YouTube and seeks to make a name for itself.

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The Paris-based company, which technically started just weeks after market leader YouTube, isn’t ruling out an initial public offering but is wary of the turbulent capital markets in the wake of Facebook’s (NASDAQ:FB) IPO last May.

Thanks to rising revenue and shrinking distribution costs, Dailymotion has recently become profitable and is now striving to increase its footprint in the U.S., which accounts for roughly 33% of its revenue.

“The next step for us is to find a new partner in the U.S.,” Dailymotion CEO Cedric Tournay told FOX Business in a recent interview.

Dailymotion hadn’t previously disclosed the search for a U.S. partner.

IPO Unlikely

In 2011 France Telecom’s (NYSE:FTE) Orange acquired 49% of Dailymotion for 60 million euros. The European telecom then bought the remaining 51% over the summer for another 60 million euros after the second part of the contract automatically kicked in.

It’s not clear if Orange is seeking to sell either the majority or minority stake in Dailymotion.

While a U.S. telecom company could be a good partner, Tournay said his preference is either a “big web player” or a “financial partner because we do know we need to invest more on distribution, content and marketing.”

Despite the need for capital, Tournay sounded skeptical about the chances Dailymotion will launch an IPO any time soon.

“It could be an opportunity, but depending upon market conditions,” he said. “It’s going to be tough for tech and Internet companies in the near future to be listed. Everybody now is becoming a bit skeptical again of Internet companies.”

YouTube Still the Leader

Either way, increased investment could help Dailymotion further close the gap with Google’s (NASDAQ:GOOG) YouTube, the industry’s reigning champ.

Dailymotion comScore (NASDAQ:SCOR) stats show its total number of servers views in July was 1.8 billion.

Viewers watched about 452 million videos on Dailymotion in July, putting the site 8th in that category among all video properties and above Facebook and Walt Disney’s (NYSE:DIS) ESPN, according to comScore.

Dailymotion also averaged 5.2 minutes per video in July, besting the average of 4.2 minutes per video of Google sites.

However, Google sites towered over Dailymotion with a whopping 19.59 billion video views in July.

Dailymotion also doesn’t crack the top 20 in terms of total unique viewers, bringing in 13.29 million in July, compared with a 157 million on Google sites and 48.69 million on Yahoo! (NASDAQ:YHOO), according to comScore.

“YouTube is the behemoth. Once you establish yourself like YouTube, it’s very hard for another company to move in,” said Roger Kay, president of Endpoint Technologies Associates.

“The onus is really on [the challenger] to explain to a potential audience why they have something to offer that is different or better than what’s out there already,” Kay said.

Trying to Close the Gap

Even though Dailymotion and YouTube started around the same time in 2005, Tournay concedes “they were better than us.”

Today Tournay said he doesn’t really see YouTube as a direct competitor and credits the company with helping to drive advertising dollars around the world into this space.

Roland Hamilton, U.S. managing director at Dailymotion, sounded a bit more ambitious about catching up with YouTube.

“I think we want to close the gap a bit, for sure. We’ve made a ton of progress against huge players,” he said. “There’s room in the marketplace for more than one player, and we’re one of them.”

Unlike some other fields, there still appears to be an enormous amount of demand for online video with new users tuning in all the time.

“The percentage of overall video being consumed globally is radically increasing every single month, week and quarter,” said Jay Fulcher, CEO of Ooyala, which powers videos watched by almost 200 million unique viewers each month.

Social Networks, Professional Video Eyed

So how can Dailymotion and other players try to take a bigger piece of that growing pie?

Leszek Izdebski, a managing director at Cisco Systems’ (NASDAQ:CSCO) Internet business solutions group, pointed to a trend favoring professionally-produced online video.

“That shift towards quality is something that definitely creates opportunity for many players,” said Izdebski.

With an eye on those trends, Dailymotion is planning to open film studios for its Motion Makers and other videographers in New York and Paris early next year.

Of course, a race to quality with deep-pocketed Google could prove to be an uphill battle.

Izdebski said there’s also an opportunity for any player that successfully “takes advantage” of the ongoing battle between Facebook and Google+ by becoming a preferred video provider for a social network.