YouTube: how does it make money?

I was wondering how much a masthead (a rich media 970×250 panel) on YouTube would cost the other day.

According to this Business Insider article, the cost for a day is $375,000, based on 45 million views a day. Which makes cost per impression about 0.1 cents. There’s no room for a profit mark-up there, in my opinion, unless you don’t use the CPM calculation criterion.

The company made $1 billion in revenue in 2010, which was up seven-fold from 2007, and 5 years on from its acquisition by Google for $1.65 billion is finally close to breaking even (this recent Fast Company piece is very detailed). I wonder if the $375,000 number factors in the cost of people working on an ad at YouTube (design/coding), because if so that would affect the profit figure (assuming they are by now making a profit). As a colleague of mine said today when we were discussing it though, YouTube gets 45 million views a day irrespective of whether people or brands advertise on it or not, so in a way all of it is profit.

It’s an interesting model. Brand channels, for example, are free, but brands have to spend a minimum of $40,000 (£25,000) on advertising on the site (there are different ways to split this cost: advertising on AdWords and the Google Display Network for example).

Also, there must be a tiered way of calculating the cost of an ad depending on the size of the ad and its location on the page, just like, for example, a mall would charge different stores based on whether it’s in a prime location in the front or tucked away at the back.

It really looks like the monetization team at YouTube is hard at work behind the scenes though. Today, they’ve announced YouTube Next and Next New Networks to drive profitability as much as they can through partner relations, and just a couple of weeks ago, there were rumours (promptly quashed) that they were planning to test a movie-streaming service in the UK.

I’d love to look at the operations from the inside!

User engagement

I use Google Analytics a fair bit at work, and have been mulling over the question of how we can really define user engagement for ages. Today I found a rather good answer on Quora, funnily enough by one of their own Product Designers. My own answer typically is time spent on site, but I realise that isn’t good enough because you can have a page open and not really be interacting with it much; indeed you may be looking at another open tab. Whereas if you see multiple visits over a sustained period of time, that’s a much better indication of whether someone is really motivated to visit your site or not, and therefore engaged with it, even if he or she does not leave comments and so on.

If I had to live with just one user engagement metric, it would be Visitor Recency.

Visitor Recency measure how frequently your visitors return to your site. Specifically in Google Analytics, it looks at what percentage of your visitors come back each day, every other day, each week, etc. The reason I like this metric is that it’s crucial for building a meaningful web product, and it’s almost always a positive signal. If someone comes back to your site regularly each week, or even better each day, it means you’re becoming a regular and important part of their life. The problem with any other single metric is they can be the result of positive or negatives changes to your product:

Visits & pageviews are susceptible to all sorts of external factors, like SEO, SEM, press, seasonal traffic swings, etc. Bounce rate is dependent on the type of traffic you recruit, going up with things like SEO/SEM and down with directed traffic. Time On Site and Pages/Visit are good, but will oscillate with design changes, e.g. paginating long text articles will increase Pages/Visit without being any better for your site.

Ultimately the best indicator I’ve found of creating a truly great experience is whether people want to do it again. And again. And again and again as part of their daily routine. Visitor Recency is the best way to measure that.

*A number of caveats: Of course, to get a full idea of a site’s engagement you need a battery of metrics, not just one; My answer is for sites that don’t sell products, so I’m ignoring anything like “Conversion to Purchase”; I’ve restricted my set of choices to those available in Google Analytics, so as not to give some crazy, derived, business-specific metric, though that may be right for you…

As Joel Lewenstein points out, I’m not saying this one measure in Google Analytics is sufficient to track user engagement, but without getting into a complex equation, I think this is a good solution. I’m not the biggest fan of quantifying user engagement in terms of page views and unique visits due to the potential to skew results with SEO and the like, and this to me is a suitable middle path.

TripFriends, Anyone?

I heard about TripAdvisor’s TripFriends in an interview with Steve Kaufer, CEO of the travel review site, in BA Business Life. Quite intrigued to know something like it exists because I’ve seen so many friends’ status updates on Facebook asking for recommendations from their friends when they’re planning a trip somewhere, and surprisingly, no one I know’s mentioned TripFriends at all before. I think it’s an interesting feature because TripAdvisor is one site millions of people around the world check for trusted hotel reviews before embarking on a trip, and Facebook is the one place millions of people go to to talk to trusted friends. A natural evolution of sorts, then?

You didn’t send it

I keep getting PR emails now and then, but surely the people who send these emails and use Yousendit to send me campaign or brand information are aware of the fact that there’s an expiry date on the files they send me, and that I may decide to take a look at it a few weeks later? Or perhaps they assume that I’m at their beck and call and will access the links then and there? Ah well.

Facebook privacy and all that

In a remarkable coincidence today, I read this post, an interview with an anonymous Facebook employee (the post’s authenticity is being highly debated on the web), which contains this excerpt:

How do you think we know who your best friends are? But that’s public knowledge; we’ve explicitly stated that we record that. If you look in your type-ahead search, and you press “A,” or just one letter, a list of your best friends shows up. It’s no longer organized alphabetically, but by the person you interact with most, your “best friends,” or at least those whom we have concluded you are best friends with.

And then on Facebook, I was messing around with my settings and I noticed this when I clicked the ‘edit options’ link:

So it’s true. I just think that’s quite an amazing thing – I almost didn’t believe it. And for the record, no, I’m not paranoid about privacy issues for the simple reason that I don’t have hundreds of photos on Facebook, though I am very much for privacy as a right.

Taped Together

The lovely Mel Exon (@melex) invited me to be a part of her Christmas crowdsourcing music project with Maria Popova (@brainpicker): Taped Together. This is how they describe it:

Each day of December, we’re uploading one season-inspired song, curated by a different person. On December 31, we’re putting the compilation together as the world’s first crowd-curated holiday playlist for anyone who wants one.

Mine is today, and it’s All Over the World by the Pet Shop Boys. The project is shaping up beautifully. Some of my personal favourites so far are Here’s To You (Ennio Morricone and Joan Baez), Big Jumps (Emiliana Torrini), The Star of a Story (Heatwave), Hands in Pockets (Laura Gibson), and Happy Christmas (John Lennon and Yoko Ono).

It’s a great collection of songs in general – you should go and give it a listen.

Dreaming of a single digital home

Mansi made an interesting comment on one of my posts, about where the web is heading:

‘instead of having multiple social stops, we’ll all have one social home, so we don’t have to leave. ever.’

I’ve been thinking about this for a while now and though that is logically where we should be heading, I wonder if it will be possible in practice. I’m thinking of a service that is like FriendFeed and houses all your social presences in one place, but it should have one crucial difference: users should be able to control their privacy levels. So something along the lines of Facebook from the privacy point of view, but it should allow asynchronous following of people, like on Twitter. Currently Twitter offers only two options: on and off (via protected updates). Facebook is simpler from that point of view but requires approval when anyone ‘friends’ you in order to have them in your network. Another key issue in the service I’m talking about would be needing to use only one password to access everything, instead of having to remember multiple passwords for every site you log in to. 

Of course, single sign-on would need to work, and that can only happen when one company owns all the sites in question. Google is the closest so far. Yes, it does beg the question of monopoly – power corrupts, and absolute power corrupts absolutely. 

So maybe all this is just a pipe dream, and someone needs to invent a smarter way to save passwords, which automatically gets updated when you change them on any of the multiple sites you use – which will in turn need a password of its own! 

I can’t stop thinking of the potential of the single web home idea though. It will be like your digital passport – the only document you’ll need online.

PS: Read this really informative post by Tim O’Reilly on the subject of the coming War of the Web.

Cut out and keep

I don’t think I’ve seen the words ‘cut out and keep‘ used in a digital sense lately. It’s an interesting reminder that people actually used to cut out and keep announcements of noteworthy events from newspapers and magazines not too long ago. I used to myself – but can’t remember the last time I ever did. 

I suppose the equivalent of that on a digital level is bookmarking.

Making The News More Social

ndtv social

Indian news channel NDTV has launched an interesting website that aims to make themselves more social. Called NDTV Social, it has groups for every news anchor on the channel, and their popular news programmes, and readers can, Facebook-style, become fans of either or both and initiate discussions with the news anchors, many of whom are very popular in India and have their own Twitter accounts. It is integrated with Facebook, Twitter and Google. There doesn’t seem to be much of a take-up at the moment – the community seems fairly small. But I think it is an interesting model to look at. Facebook fan pages do the same thing to a large extent, but this website allows NDTV to become the media owner, rather than a third party site like Facebook. It’s certainly a new model – I can’t think of any other news site that offers this kind of interaction. I’m not sure if it will be successful, but it certainly looks like NDTV is, at the very least, evolving with the changing times. 

[HT: WATBlog]