Is YouTube Betting Its Future On Content Or Technology?

Once Facebook bought Instagram, some wondered if it was a matter of time before Google would acquire Pinterest.  Indeed,  once something becomes huge (like Pinterest), Google wants it. But if a young, small company addresses one of Google’s problems earlier on in the company’s lifecycle, Google thinks it can do it itself, in-house.

Pinterest’s discovery benefits seem like a natural fit for Google’s YouTube, which is now seeing over 60 hours of content uploaded to the site every 60 seconds.  According to Google’s head of corporate development David Lawee: “If you look at what we're rooted in, it's kind of obvious what we're looking for....The most challenging problem we have right now is discovery of video, that's the most challenging problem on the web. Social is one enabler, tagging is one enabler."

Theory vs. Practice

That statement makes me think of the various branches of the U.S. military.  If you believed Lawee’s observation, you’d think Google would have bought – but it didn’t.  In fact, corporate development and business development executives (let alone product guys) don’t always see eye-to-eye.  Corporate development executives operate at high altitudes like the Air Force; business development executives are like the Marines; and product managers grind it out in the trenches like the Army.  So while they technically share the same objective, they don’t necessarily share the same approach to a problem, let alone find the same solution.

Humans vs. Technology

While Pinterest addresses the discovery of videos indirectly via curation, there are countless entrepreneurs who are focusing their attention and efforts on directly solving this problem via technology.  I’ve long told those entrepreneurs that these shiny tech solutions to improve YouTube’s signal-to-noise ratio will have a hard time gaining traction (doesn’t mean they shouldn’t pursue this, of course) because:

- Like many awesome businesses with their share of challenges, YouTube doesn’t necessarily think it has a problem.
- Google doesn’t want your product until you’re huge -- at which point it will think that it needs it.
But therein lies the challenge: YouTube is the monopoly in video, but it wouldn’t want to partner with a startup, because it would do to that startup what MySpace did to YouTube early on: give it validation and traction.

Told You that Stupid Quadrant Would Come Back to Haunt You

Online video can be broken into four quadrants: content, technology, advertising and distribution.  Even though content and distribution are often seen at odds, content is the only box that plays nice with the other three; all other three seek to kill one another because tech is a zero-sum game.

Online Video is the Afghanistan of the Media World

As such, these tech innovations that seek to “fix” YouTube’s so-called discovery problem are in a bind.  That is why online video is the Afghanistan of the media world: everyone keeps thinking it can overcome it, but even the winners find themselves in a quagmire.

An outsider looking at YouTube would argue that discovery of video -- or cutting through chaos and clutter -- is the hardest problem Google faces right now. But anyone working in advertising and publishing will tell you that that is oversimplifying the “problem,” because the common area between what viewers watch, distributors/publishers want to feature/showcase,
and advertisers want to promote alongside of is rather small. 

YouTube is Betting On Content, Not Tech

You’d think Google would be buying every startup in sight looking to fix this issue, but it’s not.  Instead, it’s paying $100-200 million up front for content.  YouTube doesn't needs  more brand-unsafe content being watched. 
In fact, a conspiracy theorist would almost argue that YouTube will move away from technology-driven discovery in favor of good old-fashioned (read: human-based) programming and the funding of content.

Let’s face it, left to their own devices, human beings will only watch more violence, news that might be unsafe for brands, raunchy humor, sex, etc.  A wise man once reminded me that human beings have a tendency to like “bad” things: wine, cheese (food gone bad, basically).  Content consumption is no different.  Video – the combination of sight, sound and motion – is especially susceptible to that.  Viewers have to be force-fed brand-safe content.

Meanwhile, I recall that  on some conference calls early on in 2007-08 for YouTube, which then featured much brand-unsafe content,  YouTube managers actually believed that technology alone would land them $20 CPMs.

But over time, YouTube imported executives like Robert Kyncl from Netflix (you can argue Netflix isn’t a content producer, but for YouTube, that’s as good as it will get at this stage of metamorphosis).  While YouTube is a distribution partner of my company, we didn’t get any of the upfront opportunities -- so you might assume that I would say that YouTube doesn’t get it, but au contraire, YouTube certainly does:

1. It’s all about content;
2. Content – like advertising – has a negative ROI early on;
3. But if you want to sign up Fortune 500 advertisers, you have no choice but to be a content company.

1 comment about "Is YouTube Betting Its Future On Content Or Technology?".
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  1. Mark Walker from aka Media Mark, April 26, 2012 at 12:09 p.m.

    Don't we ALL want $20 CPMs in the online world? Anyone know how to get there- please share!

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