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YouTube Growing ... Like Cancer?
PreacherTom writes "The success of YouTube has been staggering: they currently field 100 million videos per day and have attracted the attention of influential people like Bill Gates, who may be planning his own video hosting service. However, growth does not always equal profitability. Incorporation of ads risks their very base. If that were not enough, like Kazaa, they struggle with the Damocles' Sword of Litigation hanging over their head each day while bandwidth and server costs continue to rise. Is this phenomenal growth only rapidly killing our favorite video warehouse?" From the BusinessWeek article: "YouTube could easily alienate its users by overwhelming them with ads. And the startup has to figure out how to attract a broader group of marketers by filtering more for copyrighted or offensive videos and by creating more channels of similar content. Aware of the risks, YouTube co-founders Chad Hurley and Steve Chen are moving slowly to ramp up advertising. They have been wary of asking viewers to sit through a 30-second ad before a two- to three-minute clip. Instead, YouTube is developing new formats, like ones rolled out in August that let marketers build their own video channels or pay to place a video on YouTube's popular front page."
People look at the front page of youtube? That's news to me. Only time I ever see youtube is when a video's linked to by a blog mentioned on a slashdot web 2.0 competitor's website...
The problem with pay-for-play and other models is that there are big fees in the processing of the transaction. They should set up their own little financial system where people can transfer $5 from their bank account and then just directly transfer the money from there. ING Direct does this transfer for free for me, so I can't see there being any expense for them to do this on small payments. It'd require some overhead, but it'd be worth it as it would quickly infuse their site with a lot of cash. They could then just charge literally $0.01-$0.05 per transaction and make good money. That way, a $0.25 tip would earn several times more than it would on iTMS for the artists.
I made some lovely graphs to illustrate this growth. These graphs use actual thumbnails from youtube as data points.
That's right - the medium is the message!
If eBay made you click through ads before seeing an item's detail they'd lose a lot of visitors.
I don't know where you've been, but I'm running into these things constantly on eBay and paypal -- I'm taken to a full page ad I have to find the button to get past to go where I was intending to go, not this fscking billboard.
Alas, I'm still there because I want to buy, sell or pay for stuff, so I have to put up with it. If YouTube's offerings are good enough they can probably pull it off as long as they aren't making you sit through 30 seconds. 5 Seconds is a lot of time and if used well could accomplish what the sponsor wants.
Ad sponsors need to look beyond the current model of television/radio advertising. It's astounding where it has come from, back in the 40's and 50's the company often had a very direct hand in it's own advertising and it showed, by interferring with programming and rather stupid advertisements. Today most leave that to an agency which is very good at using sex or perception of inadequacy to sell everything from make-up to cars.
Besides, with the pay to be on the front page feature, I can see Coke, Dell, Revlon, whomever, creating their own guerilla videos, which are really ads in disguise, and peppering YouTube with them.
A feeling of having made the same mistake before: Deja Foobar
Charge a membership fee.
Now, before everyone goes bonkers, lets think about this critically. Servers, the power to run them, the buildings to house them, the people to keep them running, the people to write the code that makes the site run -- these are not free. If you don't have a huge wad of cash burning a hole in your bank, then you've got to find a source of funding, one which won't suddenly dry up and leave you with no way to run the show.
So charge for the service. Plumbers do it, lawyers do it (excessively it seems), hospitals do it... why not an Internet service? You pay your $20 a year and get free unlimited uploads. For those who don't like the model, you can have a free account, but we charge you a nickel for every upload. It might cut down on the megatons of crap that get uploaded, which would ease the strain on infrastructure and storage, generate constant revenue, which would ease money headaches, and generally improve things. And then, when YouTube gets so successful that it's ubiquitous, its CEO can embezzle huge amounts of money and leave the company broken while he sails away on his yacht.
GetOuttaMySpace - The Anti-Social Network
Someone needs to take the YouTube, et. al. concept and convert it into a P2P system that is easy to use. The p2p client could have a web interface to make it feel like current services and even use flash to show the videos downloaded locally.
They should think outside the box and put the ads after the video. Seriously, I wouldn't be surprised if it turns out that post-ads are viewed less frequently, but more effective enough when they are viewed to make up for the smaller eyeball share. Or they could just start their own cable channel.
Posted this in a related Fark thread, and I believe it still holds:
I think that, somewhat ironically, TotalFark shows how websites will survive in the future.
Even with the increase in ads and ad revenue, consumers are wisening up and finding ways to block them, and soon that well will go dry. So you can either overload your site with ads (which, ironically, means none of them get exposure since the overload causes the user to ignore them all), or you find another method of income.
The solution? Payable accounts. Take Fark as the main example. The majority of users enjoy a few hand-selected odd stories surrounded by ads. These ads are actually targeted towards the general Fark demographic, so they get a better CTR.
Then there's TotalFark. A verifiable anarchy of submitted stories, good, bad, and ugly. There are dozens of threads a day from people whining about the mose inane shit. Half of the links are repeats. Once a day we get a headline telling us to Google "miserable failure". But you know what?
A few thousand people pay $5/month to see that stuff, myself included. And all it really boils down to is getting more of the same stuff that the free people do.
This is how most internet sites will eventually turn. You have free stuff and then you have better stuff that costs money.
YouTube could offer high quality videos to paying customers. Offer the ability to help "distribute" content for indie producers. They pay a fee (probably more than those that just get the higher quality stuff), and they get content featured on pages, more options for uploading, and other goodies. YouTube could even offer a service where producers can have made-to-order DVDs of their work for purchase by regular users. YouTube and the producers would split the profits.
It would cost about $2 to make a custom DVD and package of something an hour or two hours long. Sell it for $5-$10 + S&H, and there you go.
They could get started by allowing uploaders to "share" their stuff, and a regular user could pick clips adding up to, say, an hours worth and pay $10 total for a DVD of all that. You would have an issue with people uploading shows and what not, but they would be able to either hire people full time to police copyrighted stuff or have a volunteer network, where the volunteers get free DVDs/free upgraded accounts for helping to report copyrighted stuff.
A lot of sites are already heading this way. LiveJournal has a pay service. You get a bunch of extra features, but mainly it's more of the same. MySpace will probably start locking some features behind a pay barrier, like streaming music, if ads don't make enough.
Some sites, like general news sites or just general all around sites will meet some problems with this, but they will just do this in bits and pieces rather than the entire site (Yahoo! and MSN have already started on this path, and I wouldn't be surprised if Google starts charging for some new extra goodies).
The way of the web, most media, will eventually decrease advertising as people are able to pick and choose what they want instead of being forced into packages.
Slashdot's own pay-for service is another example of the trend, though the features you get with it are lacking. (Sorry, guys, but seeing a dupe a bit eariler than someone else, removing ads, and getting a nice * next to my name is not really worth the money.)
There's no reason why they couldn't amend the video directly to put ads 'around' the content, such that they'd still be visible in an embedded player. Or they could overlay ads. Still, I'm not convinced that level of bandwith usage is ever going to be covered by non-obtrusive ads.
Let's see, go bankrupt or alienate some visitors.
Unless it's worth going bankrupt over and having a heck of a time getting financed for the next project, I'd say it's not a hard decision to risk losing some visitors in order to not go bankrupt. It's pretty pathetic when owners of a large site believe in the bandwidth fairy and fail to recognize they're the fairy. They're the ones paying for it.
It's time to either start putting some limits in place to get costs below revenue or to raise revenue. And if some visitors can't deal with it, then good riddence to them. You don't need a bunch of leechers driving you into bankruptsy. They obviously don't care about you so why worry about them?
Work Safe Porn
Oh the vanity! People really do that??? If I want you to see my video I'll put it on my own site and mention it somewhere, maybe even slashdot and it it's interesting word will get around, if it's not, my ego won't be crushed. I will be pissed if those weasels at thinkgeek steal it for another merchandising product.
If you have video content that you want internet users to see, like a commercial, the front page of YouTube is a very, very good place to put it. Why? Because the people looking at the front page of YouTube are, by definition, people who both CAN and WANT TO look at videos on the internet.
It's otherwise hard to get video content to internet users. Many don't have the bandwidth or the software to play the video in the first place, others you risk angering by essentially taking over their sound system to display your ad.
People going to YouTube are already predisposed to WANT to watch videos. That's what they are there to do.
So, I'll go ahead and solve YouTube's problem for them: Like Google, have a 'paid placement' section alongside the rest of the videos. Let people pay to have their videos where people can see them. You might even let people pay to have videos display with ceretain keywords. Maybe I search for 'Dew' and along with the rest of the results, I get the latest Mt. Dew commercials. Just like I find the ads returned with search results on google HELPFUL when I'm using Google to search for a commercial service, I might find video ad results helpful when searching YouTube for videos.
Don't piss off your users by MAKING them watch, or by having the videos run automatically - leave it to the advertisers to generate YouTube commercials that are ENTERTAINING. Then let YouTube do what it does best - spread the word about entertaining videos.
There's also a bonus here - there's no reason that the person who charges the advertisers NEEDS to be YouTube directly. If I can buy placement for my video, I might get an advertiser to pay me to create a video, integrate their ad into my video, and then pay YouTube to make sure my video gets seen. You could create a whole new advertising medium where video producers effectively 'buy airtime' on YouTube through paid placement and then pay for that by selling commercials or product placement within their videos to other advertisers.
YouTube would then become essentially the TVGuide of internet video content: Everybody with an internet video gets a listing, but people who want to pay get the full-page ads.
paintball
Occasionally I'll get on YouTube's site and search for something or browse through the top viewed/rated. I might sit through one 15 or 30-second ad, but often I watch a video for less than 10 seconds anyway. I'm not going to watch a 15 sec ad for that.
Another time I see the videos is stumbling on some blog with them embedded. Usually there are several embedded in the blog. If the video or the description looks interesting I might give it 5-10 seconds to decide whether to watch it or click stop.
I don't think I am the only ytuber like that. With anything more than 1-2 seconds I'm just not going to watch it unless I *know* it's something I *really* want to see. And I can't imagine kids having more patience than me.
In the pilot for the old Max Headroom series, Network 23 pioneered a new type of advertising called "blipverts", fast, tightly-compressed burst of audio-visual information designed to prevent viewers from switching channels. Unfortunately, they had the side effect of making their "perpetual, more slothful viewers literally explode" but a similar idea could work here. YouTube doesn't have the advantage of conventional television, where people are watching a minimum 30 minute show, and will sit through a 30 second commercial spot in order to get back to what they really want. YouTube is offering what are essentially extremely short TV shows as their primary product with no real possibility of a commercial interlude. On the other hand, a two second advertisement presented at the beginning, if entertaining (or startling) enough, might be very effective yet not turn viewers off to the service itself.
Heck, if they want this to really work they should offer a plan that would reward submitters for presenting typical YouTube videos formatted as advertising for specific products. Those videos could then be shown to advertisers, who could pay to have the ones they like presented to regular YouTube viewers as advertising.
The higher the technology, the sharper that two-edged sword.
Google video does the same thing. Flash video actually rocks. Great compression, fast reliable player and widely supported (requires flash player 7). Flash video player is pretty much everything that realplayer et al aren't. And the fact is there isn't a good, open embedded movie format yet.
Sig removed because it was obnoxious
The flip side to this, though (and it's an uncanny idea) is that if YouTube didn't do it, *someone would*.
It is simply a desired niche of the Internet to have video clips of all varieties easily available for searching, posting, and referencing.
And ultimately there's no business model to support this. The SOLUTION is to subsidize this service with another service. It can be video-related (charge content producers for placement, or charge users for higher quality), or it can be otherwise (Google Video subsidized by all other things Google.)
So what'll happen? YouTube will get bought by someone who can subsidize this in exchange for the goodwill of being YouTube. Someone like Time Warner or Disney/ABC or Blockbuster. In fact, if I were kind of invested in an old media (Blockbuster, New York Times, etc.) I would be verrrrry interested in acquiring YouTube to complement my actual moneymaking ventures.
But the ultimate point is that whether or not YouTube has a viable *business* model is not relevant. A centralized video clip repository is something everyone wants, but no one is willing to pay for.
youtube is obviously the biggest player in this market right now. But Google, Microsoft & others all have the ability to fill that void, ad-free. If another company can provide the same service with no ads, how many viewers are going to stay just because its youtube? It may take some time for people to descover other sites. But I think eventually, the ads could push a lot of viewers away.
It would seem that if bandwidth is an issue, why not offload the bandwidth to the users? Distributed networking and file sharing has been around for a while now, a service like youtube could benefit greatly with a customized version of it. Instead of having the users get the movies directly from the site, use a distributed system similar to or even built upon bittorrent.
I'm not sure I would pay (as an advertiser) for a quick glimpse at my logo. However, what if the screen was setup like those horrible cable news channels: content above a small "strip" of ads at the bottom. Would that be a fair compromise?
Buy product X...Go to this new website...Scam Co needs your money...
Unlike the TV, if one of the ad headlines grabbed me, I could "take action" (click) right away, whereas with TV I tend to just surf away from commercials as soon as I realize it is a commercial (those buggers are tricky sometimes).
Using Flash, these "border ads" would work fine no matter where I viewed the video...be it YouTube's site, embedded in a blog, etc.
barack to the future?
Last night on the local 1/2 hour news show there were 12.5 minutes of ads. Occasionally I tune in to a show like "CSI" or "Grey's Anatomy" and tune out about the second round of commercials. I can tolerate 2 or 3 ads, but 7-10? No Way! The content has to be exceptionally good for me to watch a commercial program these days. I think "Dancing with the Stars" may qualify, but they don't seem to have as many ads.
I never go to Yahoo! Music to watch videos anymore either, because I have to put up with the ads first. I want to select a bunch of videos, usually the same type (Jazz, Pop, etc.), without having my entertainment interrupted by ads.
The person who figures out the balance formula for paying for services with innocuous, acceptable advertising is going to make millions of people happy and become rich at the same time.
"The mind works quicker than you think!"
You know, I TRIED to do that...I tried to watch nothing but ads...there used to be a fun, free service where I could sit and watch ads. Maybe you remember it - it was called adcritic? You know what happened? It went to subscription. For a while it was around $400/year. Now it is $99/year. WTF? How is that youtube is free, with the amount of bandwith they surely use, but a site that is NOTHING BUT ADS costs $99/year??
As a republican I feel it my responsibity to manufacture criminals. People need punished!
Back in the days when you didn't need a business plan?
YouTube is in a very different situation. The failures in the dot com gold rush were speculative web site concepts. "If we build this type of site, maybe we'll get a kabillion visitors and from there, we can do XYZ to make money from the traffic." People were investing in the possibility of these schemes being successful at attracting traffic.
YouTube has already crossed the traffic hurdle. They've built amazing brand awareness with NO ADVERTISING. In the failed dot com model, the idea was always to build awareness through massive traditional advertising campaigns.
If YouTube were to have its nuts removed over copyright violations (ala Napster), there are plenty of companies out there that would purchase it for the brand awareness they've already built. If Ted Turner were to get interested in pay-per-view internet video streaming, which might even have a very different offering than YouTube, buying YouTube for $100 million would be attractive because starting his own brand would require a similar investment in advertising to draw visitors.
That's why Bertleman bought Napster after it had been disembowled.
Seth
$5 / month hosted VPS on linux = awesome!
There is one benefit of growing. The larger you get, the lower infrastructure costs get per-user. The more bandwidth you order from a single provider, the better per-megabit costs they'll give you (You can bet they'll give somebody leasing a 10 GigE connection a way better deal than someone leasing a 100mbit FastE connection). The same applies to hardware, the larger your data storage requirements, the cheaper it gets. You can start taking advantage of things like Sun's 48-drive fileserver.
Yes, the "rule" applies less to hardware than bandwidth, but in general, the more money you've got to work with, the more you get for each dollar.