Apr 10, 2009

Is YouTube going down the tubes?

If the ubiquitous YouTube can't turn a profit - if billions of eyeballs and Google's best efforts at monetizing popular content can't turn a profit - then what chance do newspapers have at turning popularity, a strong brand name, interactivity and free online content into a solid moneymaking venture?

From the Silicon Alley Insider:
Credit Suisse estimates YouTube will manage to rake in about $240 million in ad revenue in 2009, against operating costs of roughly $711 million, leading to a shortfall of just over $470 million. This half-billion dollar loss comes after more than a year of feverish experimentation in various forms of advertising, cross-product embedding, licensing and partnership deals. YouTube is adamant that ultimately they’ll find an advertising solution that will enable the ungainly behemoth to reach profitability. Looking at the math, it doesn’t seem likely.
So what can Google do to turn the financial picture around?:

Google could take a lesson from its neighbor, Hulu, and focus only on proprietary content with existing consumer loyalty and real monetization prospects. With its massive audience, this is a viable option, and a direction in which YouTube has already taken some baby steps. Axing user-generated content would seem to be anathema given the site’s roots, but it may be the surest way of putting the business into the black.

Alternatively, YouTube could implement a subscription structure for the site, either monetizing certain members-only content, or requiring users to create a paid account in order to contribute content. With so many marketers looking at YouTube as part of their viral strategy, this too could be a viable option.

That last bit sounds an awful lot like what newspaper companies are being encouraged to do.


nota said...

No one wants to accept it, but the Internet as you know it won't be around forever. Instead of this vast miasma of no-cost entertainment, you're going to see content demarcated by quality and cost. Free isn't going to be nearly so ubiquitous in the future, and the lines between amateur and pro are going to get much, much wider. Spammers, hackers, and marketers will see to it eventually.

Craigslist has had to establish a paid section to weed out spammers, google's algorithms have been cracked to the point that the search engine is a LOT less valuable than it used to be, and most of the popular web sites are loss leaders.

Think microtransactions and cloud computing. Nothing will be expensive, but very little will be free either - except for amateur content, advertising/marketing promotional content, and the occasional small-market stuff that's light enough to be supported by online advertising.

Does anyone really believe that there isn't a big change on the horizon for online content?

Bucky said...

People connect to the World Wide Web for content.

Content is provided by Ewe Tube, CNN, the NY Times, Huffington Post -- all for free.

Bur EVERYONE pays Internet Service Providers (ISPs).

Why should the NY Times and the New Jersey Polemounter Gazzette and You Tube literally give away this content so the ISPs can make money off of user demand generated by the content providers?

ISP's would not be making their billions off of email and bulletin boards alone (as in the pre-WWW Internet of olden days). It's the graphic, video and audio rich content created by newspapers, bloggers and other media creators that drives the commerce of the Web.

Shouldn't the ISPs like Verizon and Qwest and DSL Extreme be paying the content providers a reasonable percentage for increasing their business 100-fold? Maybe 1000 or 10,000-fold?

"We" may have initially missed the boat, but with some guts and brains we should be able to take part of it back.