Can $35 Dongle Be YouTube's Trojan Horse Into TV Ad Business?

A couple of weeks ago, I was at YouTube's Lean-In event in Los Angeles.  At day's end, Google's Chairman Eric Schmidt gave a talk about his perspective on YouTube's past and the future of online video.  During the Q&A, I asked him a softball question.

But I really wanted to know more about the following: With Adsense, Google essentially introduced a revolutionary ad unit that added to the user experience by totally aligned marketers.  With YouTube, the jury's out on whether online video will bring about a revolutionary ad unit – or at most, we will see an evolution in the 30-second ad unit.  Now, whether or not YouTube's skippable TruView ad unit is evolutionary or revolutionary may be semantics for now, but YouTube's introduction of the Chromecast product adds an interesting dimension to Google's quest for media domination.

Chromecast is a digital media player (a dongle, in case you need to know) that plays audio/video content on a high-definition television by streaming it via WiFi from a user's existing smartphone, tablet, or laptop.

While cord-cutters are one concern of television media companies, cord-“nevers” are a bigger, more alarming concern: an entire generation of consumers who simply never sign up for cable.  To them, YouTube is video content.  As these consumers get older and have higher discretionary income, they may not be conditioned to pay for cable (though I suspect, many will) but they will be inclined to buy big screen TVs to enjoy their programming.  Through the introduction of Chromecast, Google seems to have learned some lessons from its Android mobile strategy: Yes, it's perfectly fine to partner with hardware makers as they launch connected TVs, but that may be a slow rollout, so it may be equally effective to give consumers an affordable and relatively simple way to turn their televisions into an extension of YouTube (and thus Google's) online domination.  Google's introductory price point was $35, which is very reasonable. (Disclosure: I, along with all other attendees at Tune In, were offered free Chromecasts.)

So if you connect a) YouTube's massive collection of content and userbase; with b) the TruView ad unit, made possible in part due to Google's AdSense "pay only if..." DNA, and YouTube's massive supply of ad inventory; and c) Chromecast’s accelerating getting YouTube onto big screen televisions; and d) the fact that the 12-34 demo may already be watching more online video than television anyway -- then YouTube may actually have turned a somewhat inconspicuous evolution like skippable ads online on YouTube into a rather disruptive revolution in advertising. Suddenly, consumers can skip ads on TV, and in turn marketers will only pay for ads if consumers watch them.  Of course, the key here is that YouTube's content needs to start to look and feel like television.  That's not a given, but it's not an impossible proposition, either. 

It's worth noting that YouTube's $100 million experiment probably led its strategists to conclude that, at least to YouTube's ever-increasingly desirable audience, the difference between television and Web video is moot.  In fact, with TruView, YouTube is basically adopting a neutral approach to content, letting its algorithm determine what is quality with regards to whether or not an ad should be served before every impression.  Like it or not, this is rather revolutionary.

If there's one thing I've learned about having  multiplatform distribution, it's that mobile is growing fast, the "traditional Web" (accessing the Internet via your computer, basically) is where the action is, and over-the-top connected devices are promising, but ultimately a very small segment compared to the other two.  As such, Chromecast is an accelerant that allows YouTube's billion-plus users to make OTT a far bigger deal, fast.  We already knew that as Google and Apple were duking it out for mobile supremacy, YouTube's size in video would always give Google a foothold regardless of whether a consumer bought an iPhone or Android device. 

But what the Chromecast does is amplify both Google's mobile and video strategy, at a ridiculously low cost point to Mountain View and even lower price for consumers.  That starts to sound pretty revolutionary to me.

(Disclosure: My company is a channel on YouTube.)

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4 comments about "Can $35 Dongle Be YouTube's Trojan Horse Into TV Ad Business?".
  1. Ruth ann Barrett from EarthSayers.tv , December 9, 2013 at 12:58 p.m.
    Being channel neutral (or device neutral) is not revolutionary to those of us coming to video from high tech. THAT lesson was learned the hard way years ago with the intro of the PC, the sprouting of e-Commerce and the channel strategy experiences of IBM, Apple, HP, Sun (from whence came Eric as a triple EEE software guy) and Novell. The TV is a peripheral.
  2. Matt Weeks from WorkersCount, Inc. , December 9, 2013 at 1:17 p.m.
    I agree, the Chromecast piece is likely a trojan horse and more likely a throw-away volley to get us to create a behavioral baseline that they can use in their calculations. Not unlike the way Google used their "411" voice platform to perfect their voice reco system (and then abruptly shutter the 411 service). I believe that Chromecast, appleTV and other sub-$100 (and perhaps soon, nominally "free" if cross priced with content access) boxes and access points (with Samsung being the only dark horse left) -- (you say dongle, I say modified cable card insert thingy, or brick (STB)...) will include full browser UX, which will open the door even wider to experiments across traditional Web channels (CBS.TV, HULU) apps (ESPN, etc). Which opens the door to ad units that are personalized based on a wide range of data. We did a lot of this modeling inside the algorithm at EyeTMedia back in the day, based on the usual 7 layer taco of publicly available data, on top of our secret sauce of users' data from their social graph's behavior. With so many users and the ability to sync the adsense and adwords and overall ad response to cookies and identities tied from google's core services over to YouTube and generally anything streaming through the chromecast dongle (or anyone's attachment thingy), I would say that the major advantage will go to whoever can create an API that is able to connect those two worlds-- the dominance of Google's ad performance statistics tied to users, and the last inch of cable/signal to the end user at their screens (tv, laptop, phone, phablet, etc). It's this last "inch" (yesterday's "last mile" or "last 100 feet") that enables the ad server to make those last minute optimization calls to get the right ad to the right viewers at the right times (linear, streaming realtime and saved). It will be interesting to play around with Chromecast and the others but I look forward to the next step which is where a Chcomecast style dongle attachment brings a fully formed browser experience (chrome no doubt) to the user's experience. This is the game changer. And I'm sure lots of engineers are working it out right now. Chip horsepower, input method, and lots of other details to work out. But plenty of brain power over there and elsewhere to figure this out... with so many billions at stake. More like, trillions.
  3. Walter Sabo from SABO media , December 10, 2013 at 8:53 a.m.
    HITVIEWS was the first company to successfully engage viewers with online video web stars by integrating messages within their shows. Not banners or pre-rolls. HITVIEWS started in 2007. 212 600 5686
  4. Pete Austin from Triggered Messaging , December 11, 2013 at 5:36 a.m.
    Chromecast is an excellent technology. My colleagues tell me that several other companies have produced apps that support it, so it's becoming a generic way of driving a large screen from your phone or tablet. It may become a serious disruptive threat to everyone in the TV ecosystem.