KOL, Jr. recently introduced the preschool series, Pilar’s Adventures. © AOL.

The relative strength of each of these revenue sources varies by site, and can evolve over time for individual sites as well. Roesch says Atom’s revenues in the late 1990s were mostly from licensing to other websites, but these days, with five to six million unique users a month, the company focuses primarily on advertising and sponsorship, with licensing limited to a handful of partners.

Advertisers are increasingly interested in having a presence on entertainment portals and even in supporting user-generated content, although some are leery of the uncontrolled nature of the medium. Atom’s ad salespeople, for example, have seen interest from various companies in sponsoring AddictingClips, according to Roesch.

DeBevoise says game publishers are interested in promoting user-generated Machinima based on their games, both as a way to drive sales of the game itself and to add value for fans. Blizzard mentions Machinima.com’s World of Warcraft channel on its website, while Universal Games links to the F.E.A.R. channel. In June, the site launched a contest with Intel that allows fans to submit ideas for a three- to five-minute Machinima movie — the proposal could be a script, video pitch or clip — with the winner making the film with Machinima.com’s team. Intel and Activision also provide prizes.

Steven Starr of Revver, has developed a revenue-sharing mechanism for user-generated content. Content providers receive half of all revenues paid by the advertisers on a click-per-view basis.

Heavy ran a similar contest for sponsor Burger King, where 25 content creators were paid to make original videos featuring the well-known masked King from the chain’s TV commercials. “Some were bad and some were really, really good,” Carson says, noting that consumers viewed well over 20 million streams in the first few weeks of the contest, with two of the submissions proving especially popular.

The Revver service attaches advertising to user-generated clips, as noted earlier, splitting revenues 50/50 with the creator. The service also is developing tools for sponsors to set up animation film festivals or contests for user-generated content, either on the advertiser’s site or in a standalone environment.

Mobile Content, Merchandise and Entertainment
Online portals are more often licensing their content for distribution on mobile and other portable and alternative platforms—cell phones, PlayStation Portable, iTunes, Xbox Live! — which brings in subscription revenues or transaction fees that, once shared, add to creators’ revenue potential. This is an income stream that wasn’t available in the portals’ early days. “There’s a whole new market for short-form animation clips,” says Vigderson. “There’s money out there, partly because there are these new venues.”

Heavy has deals with Verizon and Sprint, while Atom launched AtomFilms To Go, which enables consumers to download content for platforms such as the PSP and the iPod. It also has a deal with Verizon for a mobile channel called AtomFilms Studio Originals.

In addition to bringing in revenue, mobile distribution is a way for a portal to solidify its brand image. “We’re interested in extending our brand to be a multiplatform brand,” DeBevoise says. “We want to be the brand for Machinima in all platforms.”

Revver’s Bill Jeffries notes that many creators are frustrated by the lack of control they have over creative work, which is distributed on the Web. Revver tries to give all the control to the creator.

“There’s a lot of overlap between what works online and on mobile,” reports Roesch. Atom’s Star Wars Gangsta Rap is among the most popular clips both online and on its Verizon channel. Still, not all preconceptions about what works on mobile platforms are correct. For example, conventional wisdom says the shorter the mobile clip, the better, yet Atom’s second most popular film on the mobile platform so far has been 11 minutes long. That said, the company is thinking of developing some very short, episodic (perhaps even daily) mobile-only content in addition to its mobile-distributed online offerings.

As viewership numbers for online entertainment portals grow, the possibility exists for merchandise licensing and entertainment productions. Icebox’s Queer Duck, which has been on Showtime as well as online, will come out as a direct-to-video movie from Paramount in July, while AOL’s Princess Natasha appears on Cartoon Network.

As for licensed products, AOL has signed more than 22 licensees for Natasha, the most popular original cartoon on KOL and one of the most popular of its over 200 games. Books are in stores, a DVD is coming out in August and other products will debut in the fourth quarter of this year and the first quarter of next.

“It’s a numbers game,” says Bird, who notes that licensees are impressed not only with the more than 3.5 million kids who have watched Natasha online, but by how they interact with it and watch it over and over. Both of these factors, which are unique to the online environment, help spur demand for merchandise.

Karen Raugust is a Minneapolis-based freelance business writer specializing in animation, publishing, licensing and art. She is the author of The Licensing Business Handbook (EPM Communications).