Monetizing YouTube is arguably the greatest opportunity on the Web. The same could be said about Facebook, but right now, it’s not even close. YouTube is a video property, Facebook a social networking site. Despite what people say, the big money is in online video, not social networking. In fact, while eMarketer pushed up estimates for online video advertising for 2008 from $1.25B to $1.35B, it scaled back those for social networking sites.
We’re not alone in this assessment, Google CEO Eric Schmidt refers to monetizing YouTube as the holy grail… time will tell how successful YouTube and Google shall be… but clearly: online video remains an untapped goldmine.
While Google paid $1.65B in stock for YouTube, hitherto, it’s failed to recoup any of that investment. In intangible terms, I think YouTube was a smart bet despite all of the drawbacks. After all, YouTube commands 70% market share in streams (with Google Video, Google commands a 75% share!) and 35% of users who consume video in the US. These are dizzying stats, and when you consider that online video is expected to clock in $7.1B by 2012 (According to Forrester), then even if YouTube is not the top grossing video site, it will prove to be a smart bet.
But, the fact remains, with Google doing $17B in revenues, YouTube’s $200M run rate is modest, at best. How can YouTube generate more revenue? Let’s look at some ways:
Sales:
- Create a Better Auction Interface so partners better understand rates Google is selling ads at - see more here.
- Allow for ad networks to sell across numerous content partners, or allow some partners who want to do this (ie. I’d welcome this, frankly). I am not this is worthwhile for ad networks, as a partner, I won’t comment on the terms of our deal, but for purposes of illustration, you can imagine that sharing the proceeds between Google/YouTube, the ad network and the content partner becomes less interesting… honestly, I doubt many content partners would welcome this either, but there is merit to it.
- Encourage partners to create “fake ads” for real products and companies… then feature the leading ones off the main page… Trust me, marketers will take notice and want to pay to carry those, or hire partners to create made for web ads… something that is lacking. If done right, and done in short format, some of these can become pre-rolls… as well.
Partner Content Discovery:
- Remove non partner videos from Related Videos - more here.
Google already allows users to restrict search queries on YouTube (technically the biggest video search engine, after all) to partner videos. This is smart… but why stop there?
- Tag cloud featuring only clips from partner archives.
- Featured partner thumbnail off the Main Page that rotates with every single partner they have.
- Related Provider - promote other Partners that have similar content, categories, metadata, etc. Some partners might not like this, but this is the quintessential link exchange program.
- Promote YouTube videos off Google Search Results page with no Paid Results. Google probably would have balked at this historically… but if online video is the holy grail, why not?
- Promote YouTube videos off Google Images pages. This is a natural fit… since image-based queries have a high correlation with video queries…
Programming and Editorial:
- Launch a Google Portal, heavily promote YouTube partner videos - where I see a major weakness is in lack of programming - see more here.
- Reducing UGC altogther (unlikely, I know) - see more here.
- I’d love to see YouTube commission content and what not, but don’t hold your breath, this is Google after all… though Google did get into content - sort of - with Knol. Which takes us to the last point…
Corporate Structure:
- Spin off YouTube as a separate business (impossible). I don’t think Google will ever really push YouTube - your typical innovator’s dilemma.
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August 7th, 2008 at 1:33 pm
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