• by Ashkan Karbasfrooshan , Op-Ed Contributor, October 22, 2012

Reading about Maker Studios and Ray William Johnson’s breakup, one couldn’t help but be impressed with how YouTube has gone from industry pariah to the only game that matters in online video.  Two years ago, marketers gave YouTube the cold shoulder and investors didn’t take any video content company seriously if its main distribution strategy involved YouTube.

1 - Money talks. The number-one reason why this has changed with investors is that Google changed its revenue share mantra, opened its wallet and guaranteed revenue.  YouTube didn’t just convince big media brands like Wall Street Journal to embrace the platform, it also guaranteed a ton of cash to native YouTube upstarts like Maker and Machinima, who then used that money to sign on popular “indies” to grow their comScore numbers to win over marketers. 

2 – Wild, Wild West: from the DMCA to fair use. Of course, none of this would have been relevant had YouTube not been the Wild West in the early days of online video (2005-2007).  Until Google acquired YouTube, the jury was out (literally) on whether YouTube would survive over time, because YouTube’s success differentiator boiled down to “he who has the most content, wins.”  As of May 2012, YouTube receives 72 hours of new content uploaded to its servers each minute. 

YouTube sheltered itself from Big Media’s lawyers thanks to the DMCA.  By the time the lawyers knew what time it was, it was literally too little, too late. Now YouTube is trying to be more “fair and balanced” dealing with the needs of users, remixers and underlying rightsholders.

3 – Audience matters. Ultimately, YouTube became so coveted because of its sheer size and reach.  Today the site generates billions of video streams per day.  While the obsession with viral videos has dissipated to some extent, YouTube’s barometer of what’s in or not hasn’t.  Indeed, my company’s revenues from YouTube were never commensurate with the total views it accounted for across our network.  But seeing our YouTube channel grow 100% in one year, I can say that YouTube needs to be the centerpiece of your syndication strategy, regardless of whether the revenues are underwhelming or not.

4 – Limitation of Quants’ approach. Google has always been known for its quantitative approach to advertising.  With online video representing the next Holy Grail in online media after search, when it acquired YouTube, that’s how it sought to crack the advertising code.  Over time, Google seemed to demote the quants and lured people who had experience in media, content and advertising to drive decisions.  The firm’s evolution to a full-fledged media company is a reflection of that.

5 – YouTube’s gain, others’ pain. YouTube emerged as the users’ choice, but advertisers only warmed to the site recently, and that was partly because all others who offered reach were in fact manufacturing audiences, initially running campaigns in-banner and delivering lower engagement.

6 – YouTube natives: Where the views are. YouTube has always stressed subscriptions, which allowed viewers to follow producers and be notified when new content was uploaded.  Early on, YouTube promoted the very first producers, which helped some grow ferociously early on.  Among those, some managed to expanded their audience over time; some didn’t, seeing erosion among subscribers and views. 

7 – I want my YouTube. Everyone wanted to be the next MTV: MySpace, VEVO – but YouTube is arguably the only one who can claim to have the kind of social impact and mindshare that MTV once commanded.  But like MTV in its embryonic days, YouTube has re-written the rules on many levels.  It is, however, a bizarro world: audiences are younger than the Web average and they also prefer a more raw style.

8 – Big Media’s playing catch-up. Between YouTube’s audience preferring a more raw form of programming and Big Media’s reluctance to embrace YouTube, Big Media has a major problem.  YouTube recognizes this now and sees an opportunity.

9 – YouTube Networks are nothing new, possibly a fad. What got us thinking about all of this was Maker’s rift with the first prosumer YouTube producer millionaire.  These networks get my sincere respect for having built scale on top of YouTube’s awesome platform, but any time one builds a house on someone else’s backyard, you have to be wary of the long-term prospects. 

While the YouTube networks are a mix between talent agencies and the studios, it’s worth noting that the rise of these YouTube Networks don’t really represent a long-term fix but are YouTube’s latest attempt to address its main challenge…

10 – YouTube’s double-edged sword: endless supply. In one episode of "Seinfeld" (“The Heart Attack”), George complains that he “went from having orgasms immediately to taking forever.”  That’s YouTube’s predicament, to some extent: having gone from not having enough desirable inventory to monetize to having way too much.