YouTube: Google’s golden goose

Further to my post on YouTube revenues earlier this month, take a look at this TechCrunch piece on projected Google revenues focussing on YouTube, by a Citi analyst. It answers a lot of the questions I was pondering, and confirms that YouTube is indeed Google’s golden goose.

Source: Citi Investment Research & Analysis; ComScore via TechCrunch

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!

Margaret Gould Stewart: How YouTube Thinks About Copyright

I only recently noticed that TED has started providing transcripts of the talks they upload. That’s something that really enhances my user experience. I also realised that they provide 6 minute talks in addition to their usually 17-18 minute ones. Useful to know, again!

Some good stuff in this talk by Margaret Gould Stewart, who heads the user experience team at YouTube. She speaks about how media houses like Sony allowing users to remix and re-use copyrighted content can only be good for them in the long run, using the lovely J K wedding video example.

By empowering choice, we can create a culture of opportunity. And all it took to change things around was to allow for choice through rights identification. So why has no one ever solved this problem before? It’s because it’s a big problem, and it’s complicated and messy. It’s not uncommon for a single video to have multiple rights owners. There’s musical labels. There’s multiple music publishers. And each of these can vary by country. And there’s lots of cases where we have more than one work mashed together. So we have to manage many claims to the same video.
YouTube’s Content ID system addresses all of these cases. But the system only works through the participation of rights owners. If you have content that others are uploading to YouTube, you should register in the Content ID system, and then you’ll have the choice about how your content is used. And think carefully about the policies that you attach to that content. By simply blocking all reuse, you’ll miss out on new art forms, new audiences, new distribution channels and new revenue streams.

Brand Food For Thought – Case Study 1: YouTube Screening Room

There are so many examples of brands or sites innovating and re-inventing themselves these days, that I’ve decided to start a series that will feature cases I think are particularly interesting. I believe that there are always lessons to learn from people who do this well – lessons for marketers and for other brands, not to mention lessons for strategists like myself. I’ll try not to mention cases that are old, unless they are particularly valuable. So to start this off, I thought I’d mention the YouTube Screening Room.

Case Study: YouTube Screening Room

The YouTube Screening Room is a new YouTube sub-site that is dedicated to showing top films around the world, with the premiere of a new film every Friday. Most of the films shown are between 5 and 20 minutes in length, and obviously they are put up with the permission of the filmmakers. Having done the round of international film festivals, you get the chance to watch them from the comfort of your own home, courtesy YouTube.

The YouTube story till now, in a nutshell: One of the biggest online success stories in recent times, YouTube was started in 2005 as a site to upload user-generated content. In less than two years, Google acquired it for US$1.65 billion. From teenagers uploading videos of themselves imitating their favourite actor, to actual clips of films themselves, YouTube took off with a bang. However, as it gained increasing popularity among the online community, it started facing a lot of criticism as well as lawsuits from TV networks and production houses whose programmes were being put up online by YouTube users in direct violation of copyright laws. In July 2008, YouTube lost a lawsuit filed by Viacom and was mandated to hand over information pertaining to all viewers of videos on the site.

From a public relations perspective, the introduction of the Screening Room silences detractors who claim that YouTube sanctions the uploading of films or clips illegally. (In fact, ever since the Viacom lawsuit, YouTube actually checks uploaded videos against original content through a system of digital fingerprints, in order to reduce copyright violation. I can vouch for this myself – many videos previously uploaded by other users, that I had searched for and added to my personal playlist on YouTube, have since been removed, stating copyright violation). It also sends the message that the brand is not only for riff-raff, as it were, but for more serious, original content creators as well. YouTube had a problem on their hand – and the Screening Room is an intelligent solution.

My thoughts: The YouTube Screening Room is primarily for new, independent films. If YouTube can actually follow the same legal method to obtain clips from older, more popular, commercial films and make those a part of the Screening Room as well, they will hit two birds with one stone. Maybe they’re already on it, who knows!

The importance of being simple

I was talking to Benjamin Ellis this afternoon at the Tuttle Club meeting. In addition to many IT and non-IT related things that he has done during his long career, Benjamin also helps businesses understand software applications better. As I was asking him how he goes about that specific job, I suddenly remembered why simple videos made by Common Craft and Google are so important, and Benjamin reciprocated most of my thoughts.

1. They are short. None of them is over three minutes, going up to maybe five at the most. In a world where businesses and brands need to jostle with one another for the consumer’s attention, short is not only good, its necessary.

2. They are free of jargon. I am not an IT engineer, and I don’t purport to understand what the technicalities of CSS, C++, Java and so on and so forth are. I am a user, your target user, and all I need to know is which tabs or keys to press to do what. These videos do just that with no fuss.

3. They are visually very easy to comprehend, and before anyone comes back with the quip that videos are by definition visual – DUH, what I mean is that the camera follows the exact action that needs to be performed to use the application or site properly, minute by minute, so that there is no room for doubt. Clarity is very important for the end user to be able to use your product properly, thereby getting the best out of it and becoming a fan.

Look at this video for Google Sites, which is a blog-meets-wiki-meets-personal/professional site.

YouTube Insight

For people who upload videos on YouTube, I just noticed this: they have a tab called ‘Insight’ where you can track the popularity of your uploaded videos, number of views and demographics. Just go to ‘My Account’ and you’ll see it there. I don’t really upload that many videos but I think it’s a useful feature to have. It was released in March this year in response to popular demand, according to this video.