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YouTube Is Doomed

 
 
Reply Mon 13 Apr, 2009 09:57 pm
From a recent article in The Business Insider:

Quote:
YouTube, that incandescent tower of video Babel; monument to the sloughed-off detritus of our exponentially-exploding digital culture; a Technicolor cataract of skateboarding dogs, lip-synching college students, political punditry, and porn; has reached the zenith of its meteoric rise; and Icarus-like, wings melting; is spiraling back to earth. Despite massive growth, ubiquitous global brand awareness, presidential endorsement, and the world’s greatest repository of illegally-pirated video content, Google’s massive video folly is on life-support, and the prognosis is grave.


Quote:
According to a report by Credit Suisse, YouTube is on track to lose roughly $470 million in 2009. No matter Google’s $116 billion market cap: a half-billion dollar loss on a single property, even one as large as YouTube, is a bitter pill to swallow. Even Eric Schmidt, talking to the New York Times about the YouTube acquisition, was quick to say that, going forward, Google would “be more careful with potential large expense streams, which are of uncertain return.”

Credit Suisse estimates YouTube will manage to rake in about $240 million in ad revenue in 2009, against operating costs of roughly $711 million, leading to a shortfall of just over $470 million. This half-billion dollar loss comes after more than a year of feverish experimentation in various forms of advertising, cross-product embedding, licensing and partnership deals. YouTube is adamant that ultimately they’ll find an advertising solution that will enable the ungainly behemoth to reach profitability. Looking at the math, it doesn’t seem likely.


Quote:
What are Google’s options? They seem unlikely to sustain a billion-dollar annual experiment with no path to revenue, no matter how much they paid for the original asset. In an organization feeling the sting of layoffs, is this really where Google wants to spend its money? It all depends.

Google could take a lesson from its neighbor, Hulu, and focus only on proprietary content with existing consumer loyalty and real monetization prospects. With its massive audience, this is a viable option, and a direction in which YouTube has already taken some baby steps. Axing user-generated content would seem to be anathema given the site’s roots, but it may be the surest way of putting the business into the black.

Alternatively, YouTube could implement a subscription structure for the site, either monetizing certain members-only content, or requiring users to create a paid account in order to contribute content. With so many marketers looking at YouTube as part of their viral strategy, this too could be a viable option.
 
Robert Gentel
 
  4  
Reply Tue 14 Apr, 2009 09:44 am
The problem with YouTube monetization is the barrier to entry for video to small advertisers. YouTube loses a huge amount because there's no other site on the internet pushing as much bandwidth as they are. But they do this by having the online video market completely cornered and the only problem they have is that the advertising has not caught up yet.

Right now, small advertisers who wouldn't mind advertising on user generated content don't yet have the practice of using video ads, being limited to largely text and then graphical and flash ads. This barrier is easing slowly and two things can change the tide for YouTube.

First of all, next generation broadband might finally make IPTV a reality and Google, with YouTube, is perfectly poised to be one of the possible replacements for the entire cable television industry. That's what the whole "net neutrality" debate is really about. Cable companies and telcoms are fighting to hold on to their businesses and they want to be able to throttle stuff like YouTube so that they can crawl their way to IPTV themselves before beaten to it.

So right now, YouTube is mainly used for low quality video, but as broadband gets broader this will change, and YouTube is already getting ready with their "HD" videos (see the detail in this video for an example) to be a legitimate competitor for the future of television. It's a gamble they may well not win at, but it's a huge gamble that would give them the advertising revenue that used to go to television. And remember, Google is not a search company, they are in advertising and their one medium that really works for them is search. Right now I can already put radio and television ads campaigns live using Google but this is a very very small part of their business and YouTube was a gamble to corner the future of video eyeballs. The payoff if it works is huge.

Ok, but what if YouTube doesn't become the next television? Other companies with the content portfolios lined up (e.g. Hulu, Netflix) might beat them to it by virtue of having the premium content. That's fine too, because YouTube scratches a big itch with online video anyway, the problem with monetizing it is two-fold:

1) Video is much more expensive to deliver than text. Many many orders of magnitude more.

2) The video advertising market is orders of magnitude smaller than the online video market.

Because of the former, they are taking a huge loss. But they can eliminate it though the maturation of the video advertising market. They had specialized in contextual advertising, and it's hard to get context from a video for computers. But they are launching "interest based" (behavioral is the more common term) advertising this month and all they need for YouTube to be a cash cow is enough advertisers in that medium.

And it will come, because advertising online is still the best deal out there in marketing for all but the largest of brands and ad dollars will continue to be shifted to Google. The ability to determine intent, and the ability to actually call to an action directly are game changing. On TV they know very little about who the ad is being served to. If I want to advertise to nurses on TV I have to waste a lot of money advertising to non-nurses. The only "targeting" I have is to pick nursing shows and that makes TV a useless medium for marketing to nurses (as just one example I am very familiar with).

Online, you can market to people who are looking for the very product you have at that moment. Instead of making an advertisement for TV I can bid on ads for users who search for "where to find a nursing job in Houston, Texas". Not only will that much more likely be a nurse, I can even try to only show ads to nurses who want the very specific thing I am offering. And instead of a TV ad telling them to go somewhere or call, or even get online I can have the product in front of them a click later. TV isn't like that. You can't interact on that medium, and that is what is going to change about Television.

The one knock on Google's ads, and the internet ads in general to a lesser extent, is that they aren't as useful for "branding" types of campaigns. Stuff like Coca Cola, where you aren't necessarily trying to sell something right then, and you are ubiquitous enough that such broad advertising is actually reaching potential customers because everyone is a potential customer. And YouTube and DoubleClick were the medium and the advertising agency to correct that.

The DoubleClick purchase netted them the biggest branding ad network (outside of Yahoo, which is not the same thing because they don't do well at selling branding ads anywhere other than on Yahoo itself) on the internet, and the YouTube purchase got them absolute domination of the video market. The cost of serving up the YouTube videos won't be a problem once the ad product for video is here, because unlike what the "Hulu lesson" teaches, the barrier to entry is just not that the content is user-generated, it's that it can't easily be targeted yet. It's too spread out.

That will change as the technology improves. And yes, Google does have the resources to both wait out the losses as well as deliver the solution.
xrisxs
 
  1  
Reply Fri 11 Feb, 2011 02:07 pm
the rewards of youtube and facebook are not just money. they are getting more from you as a user than money could ever make up for.
panzade
 
  1  
Reply Mon 14 Feb, 2011 07:45 pm
@xrisxs,
yup
0 Replies
 
JGoldman10
 
  1  
Reply Thu 28 Apr, 2011 10:00 am
If you got issues with Youtube you can ways use Metacafe or Megavideo- those are similiar sites.
0 Replies
 
Robert Gentel
 
  1  
Reply Thu 28 Apr, 2011 10:06 am
@Robert Gentel,
Robert Gentel wrote:
That will change as the technology improves. And yes, Google does have the resources to both wait out the losses as well as deliver the solution.


YouTube is now turning a profit.
0 Replies
 
rosborne979
 
  1  
Reply Thu 26 May, 2011 04:10 am
@Robert Gentel,
How did the net neutrality stuff work out with regard to IPTV? Will cable companies be allowed to throttle the bandwidth they provide to hinder other companies from providing content if it competes with cable content?
Robert Gentel
 
  1  
Reply Thu 26 May, 2011 12:21 pm
@rosborne979,
All attempts to legislate net neutrality have failed so far but I don't know of any case where a cable company does that (though I do know of cases where they apply different Q.O.S. to P2P traffic).
0 Replies
 
hingehead
 
  1  
Reply Tue 2 Aug, 2011 07:52 pm
The buzz meme at Educause earlier this year was 'If you aren't paying for the product, you are the product'
0 Replies
 
sumi11
 
  1  
Reply Tue 10 Jan, 2012 01:27 am
sometime you-tube is
0 Replies
 
tofayelbd
 
  0  
Reply Thu 3 May, 2012 04:41 am
YouTube is a great advertisement and entertainment platform.
0 Replies
 
jack88
 
  1  
Reply Tue 8 Jul, 2014 10:43 pm
@Shapeless,
Now comes 2014, and YouTube are not collapsed.
hingehead
 
  1  
Reply Tue 8 Jul, 2014 11:23 pm
@jack88,
The last line of Shapeless's post says it all:

Quote:
And yes, Google does have the resources to both wait out the losses as well as deliver the solution.


They sure did.
hawkeye10
 
  1  
Reply Tue 8 Jul, 2014 11:56 pm
@hingehead,
hingehead wrote:

The last line of Shapeless's post says it all:

Quote:
And yes, Google does have the resources to both wait out the losses as well as deliver the solution.


They sure did.


Are you under the impression that youtube makes money?
hingehead
 
  1  
Reply Wed 9 Jul, 2014 12:27 am
@hawkeye10,
I'm under the impression Google does.
hawkeye10
 
  0  
Reply Wed 9 Jul, 2014 12:35 am
@hingehead,
hingehead wrote:

I'm under the impression Google does.

I see no way to confirm that as the way Google breaks out the books it is not possible to see how much it costs them to run Youtube, both the infrastructure and the royalties. Also it is going to get harder to make money now that the internet companies are demanding ransom from content providers. Netflix put put a statement that they consider this to be unfair and probably should be illegal but they pay because they have no choice. I dont get the sense the Washington is going to do anything about it.
hingehead
 
  2  
Reply Wed 9 Jul, 2014 01:05 am
@hawkeye10,
You can't compare netflix with youtube - the content providers for youtube don't expect payment. Trust me the money Google makes just from tracking your behaviour and selling it to marketers makes them a fortune. They expand horizontally on web services to make sure there are no gaps in their data.
Also - the ad feeds that now precede videos are much more effective than banner ads.

Like I said back in 2011 - 'if you aren't paying you are the product'.
0 Replies
 
D45ist
 
  0  
Reply Wed 21 Jun, 2017 07:35 am
@Shapeless,
Huh.

I use YouTube more than ever. Lots more movies now than in the past. Lots of advertising on YouTube now, too. I haven't used Netflix in several months because the content hasn't changed.

Isn't it weird when what the pundits have to say doesn't align with your own experience? Happens to me all the time. Mostly in politics.
tsarstepan
 
  2  
Reply Wed 21 Jun, 2017 09:50 am
@D45ist ,
D45ist wrote:

Huh.

FYI: this is a 8+ year old thread. Clearly a generation in internet terms. That article can easily be defeated with 20/20 hindsight.

Quote:
I haven't used Netflix in several months because the content hasn't changed.

?? You mean with Netflix spending over a $ billion in producing original content? More than some small/middle sized tv and movie studios?
D45ist
 
  0  
Reply Wed 21 Jun, 2017 12:53 pm
@tsarstepan,
Allow me to clarify for those obsessed with the picayune.

Quality programming on Netflix has not changed much nor been added to in the last year. Garbage is available in abundance. I watch no network TV except sports.

This thread came up as a suggestion below another, current thread. I didn't bother to look at the date. I wonder why this website would offer it up? I wonder why you, who did notice the date would take the time to read it and respond? Boredom?
 

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