Commentary

YouTube - A Greek Tragedy?

YouTube's success at bringing video to the online masses has been commendable; however, they have provided us with little in terms of models with which to monetize video content. I sympathize, as they have a great service, and have leveled the video publishing playing field. However, as Google's advertiser conference this week shows, they are clearly having a hard time convincing the likes of Lexus to place their brand message next to my Cousin Timmy's thrilling account of his high school play.

Yes, they have included some serious content from the likes of CBS and Sony, but that's missing the point. The clue is in the name, YOU TUBE; it conjures images of the little guy, YOU the individual, being allowed to TUBE, or broadcast your homemade content. If they want to get seriously involved with serious advertisers and serious content, why not call it the Fifth Network? Oh yeah, someone tried that one already.

Prior to the Google acquisition, the game plan of the money men behind YouTube was what I like to call The Icarus Strategy. Essentially, this approach determines that you grow as fast as you can, disregarding warnings on the cost, and with such speed and statement that everyone is aware of your fantastic achievements, and is in awe of your ascent into the stratosphere. However, you soon start noticing that it's getting a little warm up there, and what's that bright round object hurtling in to view? With luck, your costly wings will not melt before an acquirer comes along, and the founders can breathe again, knowing that creating a profit margin is now someone else's problem.

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Or, less theatrically put, given the costs involved in serving video, site owners need to quickly monetize their offerings, or face significant bandwidth costs from their CDN. I have a reasonable idea of how much YouTube would have previously been spending with their CDN, and even if the cost to Google is merely a rounding error, their conference this week implies the sales team are being whipped to take up the slack. I remember back when the deal was done, Google stated: "We've never bought traffic before." Well, they've also bought into a cost base that is not insignificant--hence their insistence on an ad-supported model going forward.

Yet it's amazing to me how many content-driven business models either miss the point, or are forced in a direction that they are unsuited to. There is a three-way balancing act at play here--the users, advertisers and the site/content owners --and in order to keep the model alive, the needs of the many outweigh the needs of the few. If advertisers have ultimate influence, we start seeing "personally identifying user profile data capture gates" accompanied by their evil sidekick, pop-ups. Conversely, if users have their way, the site is free and doesn't feature a single ad. The poor site owners sit in the middle of this negotiation, with the somewhat tricky job of finding a mutually beneficial solution.

Thankfully, users' groups now understand the contract--no content is ever truly free, and that it's either ad-supported or subscription/payment-based. In tandem to this, brand advertisers have conceded that they will pay for placement if the content is complimentary to their image; if the user demographic can be loosely determined; and if sufficient numbers for reach and frequency can be met. Unfortunately, YouTube does not satisfy any of these brand advertiser value needs, either in frequency, content quality or user demographic targeting--and I'm not convinced they ever will.

The guys at YouTube created a wonderful site, and a wonderful service, but in my view they needed help from an established entity that had savvy solutions to monetize an extremely broad and varied scope of advertising placement opportunities, and this is where Google was supposed to come in. Google are the undisputed champions of the long-tail, and long-tail content is what YouTube is all about--seen through that lens it's a match made in heaven. But what went wrong, and who is diluting their special sauce--or indeed, who is putting Béarnaise on their burger?

Maybe the Google sales reps would like a little more glamour in their lives, and as such are forcing a brand advertiser strategy onto a Google property once again? Maybe if Google senior executives reminded the sales folks of their long-tail prowess, it wouldn't be forced to melt YouTube's wings on a lack of brand advertiser dollars. Maybe, just maybe, Google will do what it does best and provide a technological solution to monetize the long tail of video--now that would be an opportunity worth flying to the sun for.

Olliver has been in online media for over 12 years across the U.S., Europe and Asia, and in that time has held senior roles with Klipmart, Yahoo, Overture, and DoubleClick. He is currently in New York running a new media consultancy, and is an angel investor and board member with several start-ups and early-stage companies.

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