Everyone is freaking out over the fact that YouTube is trying to monetize but 4% of its massive inventory.
Truth is, I thought that number was lower. But whatever the number, it’s a good thing.
YouTube is much bigger than its competitors. I do not think it’s easy for an outsider to realize just how much bigger YouTube is than Veoh, Daily Motion, Revver, Metacafe, etc.
We syndicate clips to a lot of places, and trust me, relative to its peers, YouTube is eons larger. We also syndicate clips to MySpace TV. MySpace is unique, in that MySpace.com is gargantuan, so if and when a clip gets a push off MySpace TV, it can spike your traffic.
Anyway, we love all of our partners… but the point I am making is that YouTube has so much inventory that even if it could sell ads across 100% of its inventory, all that would do in the short term is pummel ad rates because supply for video ads would shoot up but demand won’t change.
The problem is that the TV companies are generating the bulk of online video ad revenues, but they control their content, so you are seeing a bottleneck of video advertising revenue on a few major sites, such as the portals and the traditional media companies (and judging from the list below, the lines blur due to partnerships and joint ventures):
- Yahoo!
- MSFT and NBC’s MSNBC.com,
- Disney’s ESPN.com, ABC.com and Disney.com
- Viacom’s MTV.com, Atom.com, Spike.com, etc.
- News Corp.’s FOX.com, and MySpace TV (despite what the denigrators say, the much vilified MySpace did do $750M of Fox Interactive Media’s $900M in revenue, people)
- Time Warner’s AOL.com, CNN.com and related properties also probably generate meaningful revenues…
- CBS - who until its recent $1.8B acquisition of CNET was out of the Top 10 properties - has embraced a more open distribution strategy, but I suspect that will tilt to a more closed (or balanced) as it owns a larger web audience where it can keep 100% of revenues (this is why, I think, you will see CNET and CBS start to get more serious about web video, something that, well, both companies should be stronger in).
Then, of course, there is market darling Hulu, who reasonably and fairly can do no wrong. Hulu - whom many miss the point about its raison d’etre - can generate revenues off 100% of its inventory, but its inventory will always be relatively small compared to Veoh et al., let alone YouTube.
The problem is these high quality sites already charge an arm and a leg in ad rates for traditional placement (banners, etc.). Then for video, they want you to take out a second mortgage. Technically, new players like YouTube, Veoh, etc., would be ideal places for more cost effective video ads… but with these, the problem is UGC. In this case, UGC stands for User Generated Crap, or User Generated Crime (as in piracy). So net-net, advertisers balk and the entire inventory (or in YouTube’s case, 96%) becomes untouchable.
But here’s the thing, in YouTube’s case, this is a Godsend, anyway:
YouTube commands a 75% market share… maybe more. So even if it can generate revenues off only 4%, well 4% x 75% is still a meaningful chunk of the ad dollars up for grabs. Trust me, Google might refer to the 4% as a problem to get Wall Street off its back, but any self-respecting ad sales man will tell, it’s the inventory, stupid.
I am not saying that ceteris paribus (did we just break out the latin?), YouTube would not prefer more sellable inventory… of course it will… but that is over the mid and long term, when advertisers come on board and embrace online video.
Right now, they just ain’t.
Subscribe:
July 9th, 2008 at 3:24 pm
But you know what? I, and 70% of other people asked by MarketingSherpa, will abandon places that load us up with preroll ads as Youtube is planning.
Doing this with preroll makes no sense to me.
August 7th, 2008 at 3:26 pm
[…] can increase revenues and lure advertisers. - Memo to YouTube: Do This, You’ll Print Money - 4% is Part of the Solution - YouTube’s Nuclear Option to Monetize its […]