The 1.65 Billion Dollar Question

Google certainly raised a few eyebrows with its recent acquisition of YouTube, especially since the site is barely a year old, has huge infrastructure costs, and significant copyright issues with which it has to contend. Throw in the fact that YouTube is just beginning to solidify a revenue model that has historically caused other online community sites to burn out, and you might wonder what Google is thinking, what they plan on doing with it, and how the acquisition should impact your own marketing efforts.

I know that I always do my homework before making a $1.65 billion purchase, so I'm sure Google has done the same. After all, they have done a tremendous job of building a loyal base of advertisers, most of whom rely on the traffic and conversions that the search giant delivers to them. In fact, many of the advertisers I work with would love to be spending more money and receiving more outcomes from Google (as well as Yahoo! and MSN for that matter). So in the most basic sense, Google has acquired a large and growing user community to which it can serve ads. If only it were that simple...



Although I believe this deal will end up being a great move for Google, there are significant hurdles the company needs to overcome in order to see a positive ROI from this endeavor, including: operations and legal issues, convincing advertisers to try the new formats, developing a solid revenue model, and continuing to foster the growth and continued loyalty of an audience with an incredibly short attention span. And while the operational issues are significant, I am confident that the joint Google and YouTube brain trust will overcome these obstacles. Their other challenges however, may prove a tad more difficult.

First and foremost will be the need to convince advertisers to give the new format a try. As it is, many advertisers are just getting comfortable with the idea of online advertising. In fact, most studies show that online advertising only makes up about 5% of media budgets. However, the tide is turning in the direction of online advertising, and ultimately, positive ROI data will help draw funds from traditional media into online. Despite that however, the reality is that although many organizations produce their own videos on YouTube (and in doing so maintain full control over their message), many clips are actually user-generated. Given that, relinquishing control to users and allowing them to tell your stories may prove to be an uncomfortable concept for many advertisers to embrace. As a result, this uneasiness may cause some organizations to foolishly avoid this potentially powerful channel.

Beyond the challenge of bringing wary advertisers on board, YouTube's development of a solid and un-invasive revenue model is paramount. In general, consumers have shown a willingness to tolerate ads as long as they do not become too intrusive. And granted, YouTube has already been displaying ads on its homepage, several of which are quite effective. (My personal favorite is the recent series done around the film "Employee of the Month," in which the film's star, Dane Cook, invited users to submit their best goofing- around-at-work videos. Brilliant.) But let's face it, a rolling ad on the homepage is not enough to justify $1.65 billion, so stay tuned on this front.

In addition, fostering growth and continued user loyalty could prove challenging for YouTube. Why? Let's be honest. While clearly a brilliant idea, YouTube is not a technically complex operation. Sure, all the videos are shown in a simple format, and the logistics of storing and displaying all those clips must be monumental. However, YouTube is really just a community, and online communities have a way of falling apart when users get bored. After Google closed the deal, numerous posts on YouTube criticized founders Chad and Steve for giving in to the "man" by selling out to Google. Obviously, in order to create new growth and maintain user loyalty, YouTube will have to work very hard to show that the needs of the community are still a high priority, and the development of new features will continue playing a key role in keeping users happy.

But how does all of this impact marketers? First, understand that you need to continue to reevaluate how you communicate with your potential customer base. Consider it further evidence that you need to communicate with your audience on its terms and in places that they, not you, choose. Don't be afraid to try out an organized campaign on YouTube, and remember that in the future, the brands that win will be the ones whose customers tell the best stories. In the end, be sure to get out of your customers' way and allow them to start talking. You won't always like what you hear, but their message is powerful.

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