Is YouTube Becoming More Like Facebook?

Before the Facebook IPO, a former-entrepreneur-turned-VC told me that Facebook was caught between a rock and a hard place, because its massive size was proving to be a double-edged sword: “How can it possibly ever increase revenues to match its user base?” 

From a basic economic standpoint, he was right, and I didn’t need any convincing: I’d always argued that Facebook was successful despite social media, not because of it.  After all, Facebook had already grown to nearly 1 billion users (plus or minus 100 million fake accounts) and its revenues were a “relatively paltry” $3.7 billion (don’t get me wrong, I would take that kind of paltry any day).  Its supply of pageviews and ad inventory was so staggering that its rate of revenue couldn’t sustain – let alone – match the growth.  But, stranger things had happened, and seeing how Facebook was increasingly becoming the de facto Internet bellwether, I argued that it was possible that fund managers would feel compelled to own the stock no matter what, driving up prices.

Obviously, in the short amount of time since the IPO, the VC was 100% correct, as Facebook is down 50%.  This isn’t intended to kick Facebook when it’s down, but to ask: Is YouTube destined to experience a similar fate? 

Now don’t get me wrong: I’ve always been very bullish on YouTube, unlike Facebook,  since after Facebook and Google YouTube is the third most popular site in the world.  I also feel that unlike Facebook, YouTube could be the world’s best branding advertising platform if the company just got out of its own way (as in “it’s hard to manage that kind of growth and scale,” NOT “YouTube doesn’t know what to do with that growth and scale”).

However, like Facebook, YouTube is growing so fast that I cannot envision how it will ever be able to match the amount of ad inventory it has.  Bear in mind that the reason why print /as historically commanded such high revenue per user rates is precisely thanks to control of its ad inventory.

Thankfully for YouTube, Google owns it, and its stock price is back at 2007 levels, which is just after it bought YouTube.  For what it’s worth, despite the talk that Facebook (and social) would kill Google (and search), I think Google is really well positioned. Thanks to YouTube, it’s the number two search engine in the world -- and until Mark Zuckerberg is willing to focus on video and content (the way – you guessed it – Google did) that won’t change anytime soon.

Newspapers, you are the 2.2%

Despite all of the strides (read: falling print revenue and increasing digital revenues), only a measly 2.2% of newspaper revenue comes from digital.  Honestly, sometimes I think that my company generates more revenue than the digital units of nine newspapers out of 10.

I realize some are still betting on subscribers and what not, but let’s be honest: only 0.1% of “print brands” have the goodwill, content, and cachet to command subscriptions (New York T, The Economist, Financial Times – who else, really?) 

If that 2.2% stat isn’t enough to freak out newspapers, this will: Apparently, print revenues have been 25 times greater than digital revenues.  That would be bad enough if I was referring to a period of say a decade.  But no.  That’s in one year.  According to the Newspaper Association of America’s advertising statistics posted last week,  $798 million in print losses for the first half of 2012 compared to the same period a year ago were only “offset” by a $32 million gain in digital. I used quotation marks because that’s not really being offset, is it?

I think that while newspapers have been chasing sexy areas like mobile, social and local (all logical areas) they are missing out on the only real path to incremental revenues, which is video (even putting everything into text format online leads to cannibalized revenue). 

Video is the only brand-new revenue stream for newspapers -- and for reasons too long to list in today’s article, newspapers have shown both an unwillingness and an inability to charge ahead with it

You’re not really comparing Facebook to newspapers, are you, Ash?

Well, yes and no.

Similarly, on the surface Facebook has been killing it in video, usurping the number-two slot from Yahoo, but that – like Facebook’s growth in general – is due to its sheer size.  Similarly, newspapers will brag about things they’re “doing in video.”

But neither is a strategy. Until Mark Zuckerberg formulates a clear strategy to capitalize from video, all he will see in the future is a declining share price. When it comes to newspapers, they are missing a key reality: If the Web has shrunk traditional media, then mobile will only shrink it further.

Tags: video
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6 comments about "Is YouTube Becoming More Like Facebook?".
  1. Khalid Low from Reindeer Company , September 11, 2012 at 6:02 p.m.
    This is a great article however two things seem a little off. One is comparing Google to FB and YT is not entirely accurate. Google is not exactly a "popular" site as those two in the sense that Google is a platform that serves a specific purpose and need for users that go there. Users typically defined as "those raising their hands" searching for what they need at that specific time. The average user goes to FB and YT to fulfill what I'd call a "leisurely" need i.e post something about themselves, read up on their friends, share a post, update pictures, gossip, look at friend's pictures etc or view a shared video on YT, look for funny videos, upload a video to share etc. Google is a platform that leads or rather directs us to what we need. Once we get what we want we typically move on. On the other hand, people spend a ton of time on FB and YT just "lounging" or passing time. Two, the statement you made bout YT’s potential of being the world’s best branding advertising platform after FB while true, the key word here is video content which FB does not have, yet. YT owns video and will continue to do so. FB has a lot of issues that it still needs to fix but I highly doubt video is up there on their radar (especially in terms of competing with YT or any other video platform for that matter). My point is YT and FB is not exactly an apple to apple comparison and won’t be any time in the near future.
  2. Ashkan Karbasfrooshan from watchmojo.com , September 11, 2012 at 9:09 p.m.
    Khalid, thanks... and fair enough: I was just trying to draw a parallel between Facebook and YouTube's inventory problem (and then suggest that Facebook - like newspapers - are overlooking video by chasing mobile, which, while sexy, isn't going to solve their revenue problem).
  3. Mike Mcgrath from RealXstream PTY LTD , September 11, 2012 at 10:21 p.m.
    Ash, Do you think branded content to contribute to a business model for YT and / or FB? www.commpro.biz/social-video/visionaries/does-branded-content-have-a-place-in-user-generated-long-tail-video/
  4. Walter Sabo from SABO media , September 12, 2012 at 2:22 p.m.
    YouTube endlessly fails to monetize and recognize its key asset: WebStars (first discovered by Hitviews.) Instead it wastes tons of money making hollywood deals for their egos that will generate tiny views and tinier dollars. Already those channels are being shutttered. Computer scientists are not the best ones to make Hollywood deals. This was first recognized by Robert Sarnoff who watched radio set sales decline in the late 1920's because people didn't really like the shows. He said, "radio made by engineers, lawyers, and accountants is not appealing to the American public." So he started a creative hot shop just to make radio shows to sell radios: NBC.
  5. Ashkan Karbasfrooshan from watchmojo.com , September 12, 2012 at 2:26 p.m.
    problem with branded content is marketers don't want to pay anything reasonable for content (they assume content that because content is made available for free it is also free to produce) and then they don't want to spend much money promoting it. that's a recipe for disaster, or at least underwhelming results.
  6. Ashkan Karbasfrooshan from watchmojo.com , September 15, 2012 at 9:15 p.m.
    Typo: Apparently, print revenues have been 25 times greater than digital revenues. Should read: Apparently, decline in print revenues have been 25 times greater than increases in digital revenues.