The Background

After officially signing on as a YouTube content provider in the summer of 2007, in February 2008 we earned the right to sell ads around our videos. We do millions of streams each month, and I have a background in ad sales, so I welcomed this decision by Google/YouTube.

For months I kept my mouth shut both as a courtesy and legal obligation (we have an NDA)… but then noticed that Google was disclosing this decision quite openly. For example,

I still hesitated to say anything, until I saw AdAge fully run with the story… quoting even more YouTube managers and listing Revision3 as an example of a partner selling ads (hum… thanks for the plug, YouTube… considering that we probably begin selling ads earlier, but I digress).

From Theory to Practice: What YouTube Needs To Do, Now

Anyway, this morning I was on a sales call, closing a deal for our inventory on our channel… and it occurred to me that YouTube needs to essentially become more transparent and “open source” this. Well, open source is the wrong term, I mean introduce transparency, basically.

Before I say anything else: bear in mind that when Ad Age ran that story, Alley Insider pulled a Valleywag and posted the standard contract on its site, prompting YouTube’s legal brass to send a cease and desist… So, I will not be talking about the specifics of the deal requirements that pissed off GooTube’s legal department. In other words, if you are a member of YouTube’s legal team: nothing to see here, move on… but maybe send this to YouTube’s Sales Chief.

But the point is: YouTube has 2 main requirements pertaining to deal size and floor rates (I don’t think I am saying anything there, frankly, as these are obvious requirements to any deal).

So here’s the problem:

What YouTube should do to both sell more (increasing sale through is always critical) and increase CPMs (what drives higher total revenue). In other words, say I could log in to YouTube and see:

- all of the campaigns that YouTube had sold against our content
- what CPM these campaigns are paying… and
- how much inventory each campaign eats up.

If we have 1M unsold inventory, then sure, I can sell that at the floor CPM… but if I see that we are “sold out” but 50% of that inventory is being sold at - say for example - $13 CPM,

Then, say I am talking to Coca Cola to run ads around our safe, ad-friendly content… I can tell them: sure, you might only be asked to pay $X as a minimum CPM, but you won’t get any impressions.

I can tell that advertiser than they should pay $14, for example. Right now, I’m flying freaking blind people!

This way, I know how much Coca Cola has to pay to see some inventory but I won’t be forced to charge them too high of a price to ensure that they get some inventory, but risk pricing it too high and making it all but impossible for them to meet their ROI metrics.

This way:

- YouTube brings in a deal that pays a slightly higher CPM
- I see what inventory is idle or low-paying
- I sell a portion of inventory that I know is deliverable… which is key and perhaps THE single greatest challenge facing YouTube (well, apart all of that crappy content and pirated stuff, of course).

If YouTube did this, I think they can generate more revenue almost instantly…

All right, enough typing, let’s fire this off to San Bruno and Mountain View.