Vimeo was founded in November 2004 by Jake Lodwick and Zach Klein to enable the sharing of high-quality videos. It was owned by Connected Ventures, which was sold to Barry Diller's IAC/InterActiveCorp (NASDAQ: IACI) in August 2006. As of October 2015, the latest available figures indicate Vimeo contributes $40 million revenue annually to the much larger IAC.

No Advertisements

Unlike its larger competitor YouTube, Vimeo does not accept advertising, and executives have said repeatedly they do not intend to change this policy. Vimeo has an estimated 170 million unique visitors per month. Although this is far less than YouTube's 1 billion, media experts estimate Vimeo would earn $25 million annually if it were to run ads with its videos.

The digital video advertising market is growing by an estimated 30% per year, and growth is not expected to slow any time soon. YouTube, which is owned by Google, has sold advertising space since 2007. When a content owner opts to allow advertising with its video, Google takes 45% of the proceeds. The company will earn well over $1 billion in ad revenue in 2015.

Fee Revenue

Vimeo has three levels of membership, and only the lowest is free. The basic membership allows 500 megabytes (MB) per week and 25 gigabytes (GB) per year of content to be uploaded, and it is only available to individuals. As of October 2015, Vimeo Plus costs $59.95 per year, allows up to 5 GB per week and 250 GB per year to be uploaded; it is also only available to individuals. Vimeo Pro was added in 2011. It is designed for professionals and businesses, costs $199 per year, and allows 20 GB per week and 1 terabyte (TB) per year of content to be uploaded.

Each of these tiers offers escalating levels of customer service and personalization. The fees supply the long-standing core portion of Vimeo's revenue. The higher level of service combined with the absence of advertising is at the heart of why many video creators choose Vimeo over YouTube, despite the latter's much larger number of unique viewers.

Vimeo on Demand

Vimeo launched its Tip Jar in September 2012. This allowed a video's viewers to pay any amount of money to its creator before, during or after watching it. Vimeo kept 15% of the revenue. Tip Jar was replaced by Vimeo on Demand, which launched in early 2013 as a filmmaker-friendly distribution alternative. Participants must be Pro members. The fee gives the filmmaker the ability to design his own video player, including artwork and logos. Uploaded videos can then be sold or rented at whatever price the filmmaker sets, and Vimeo keeps 10% of the proceeds plus processing costs.

Vimeo added another aspect to this service in June 2015 when it included a subscription service. Filmmakers can charge a recurring monthly fee that gives subscribers unlimited access to their work. Vimeo again takes 10% of the fee.

The company pitches its service to filmmakers as a better alternative to streaming services such as Netflix, Amazon, Hulu and iTunes. It is more customizable, and filmmakers get a larger percentage of the proceeds. Vimeo expects to have 30,000 videos in its On Demand service by the end of 2015.

Original Content

Vimeo on Demand's first original content was "High Maintenance," a comedy about the customers of a Brooklyn pot dealer. The series premiered in November 2012, but Vimeo became involved when it funded the production of six new episodes in 2014. The new 20-minute episodes were priced at $2 each, or $8 for all 6. The revenue split was not announced publicly. The series is the best-selling title ever on the site, and it has since been picked up by HBO.

Vimeo subsequently announced it would invest $10 million in producing original content. Three new projects have been announced: "Bianca Del Rio's Rolodex of Hate Comedy Special: Live From Austin" premieres in December 2015, followed in early 2016 by "The Outs," a series that premiered for free on Vimeo in 2012 and the short film "Darby Forever." In addition to revenue derived directly from fees to view this original content, Vimeo CEO Kerry Trainor has said he expects these projects to inspire other filmmakers to distribute on the site.