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Community Building and User Generated Content Forum

YouTube - Waiting For The Payoff
Owners Seek Ad Pro's To Advise How To Integrate Ads

 11:03 am on Sep 11, 2006 (gmt 0)

YouTube spends a tidy, and growing, sum to stream its short clips. Current estimates range from $900,000 to $1.5 million per month. Much of that goes for computer servers and transmission bandwidth. But because the company is charting a delicate course in how it handles pirated videos, its legal costs could balloon if lawsuits start piling up.

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.

The kind of problem that affects all community driven websites - large or small : when and how do you integrate advertising or other revenue structures?




 12:52 pm on Sep 11, 2006 (gmt 0)

If they start putting ads before the videos people will simply go elsewhere.

They should think instead about putting advertising around the vids - so that you can still watch the movie clip - without any delay - while still being "exposed" to adverts.

As oppossed to lots of adds, I'd go for one advertisers "theme" per page. The entire page would be branded according to the sponsor e.g. background colour, images/text box, stylesheet, links to advertiser. There would not be any annoying floating things or pop ups - and the layout would need to remain the same from page to page to avoid annoying everyone - so that includes the top left movie area and the links to other videos.


 1:54 pm on Sep 11, 2006 (gmt 0)

They could probably slash bandwidth costs if they stopped allowing other sites to embed the videos. The poularity of YouTube has reached critical mass and they no longer need to brand themselves.

I would pay to have a link to my site or to make the video clickable. I would also consider paying to have the video encoded at a higher resolution and bitrate.

On a related note I would love to see them set up a friends network like myspace.

[edited by: MrSpeed at 1:59 pm (utc) on Sep. 11, 2006]


 2:41 pm on Sep 11, 2006 (gmt 0)

MrSpeed is no doubt correct, but that will mean they will only lose a bit less money. YouTube's primary problem is not its cost, but its lack of income.

It's interesting to me that many of the most popular videos are coming from professionals. (Comedy Central's Daily Show, for example.) Now, if I where Comedy Central, I'd have a MAJOR problem with what YouTube is doing. (Keep in mind that these cable channels get paid by the cable companies as well as from the ads.)

Google should be looking for ways that producers of these videos (large and small) can get ads on them. Now, how YouTube is going to share in that, I have no idea.


 4:09 pm on Sep 11, 2006 (gmt 0)

YouTube's biggest problem is how crappy the encoding they use, is. It makes video watching barely livable. If they were to add an ad to the beginning of each video, they'd have to seriously up the bitrate they encode at if they expect people to sit through it.

Ads at the end of the video would make more sense. Give the user an option to go "do something" after they've watched a video. Watching a video of Diet Coke and Mentos? Show an add for Walgreens or something.



 4:12 pm on Sep 11, 2006 (gmt 0)

2 - 10 second ads before all clips over x minutes in addition to the channel thingy they got going.


 4:19 pm on Sep 11, 2006 (gmt 0)

The tough part in building a community is getting critical mass and growing; monetization will come to a successful community.

I recall people saying similar things about MySpace, who recently signed an ad deal for nearly a billion dollars.

YouTube needs to monetize, and perhaps they can look to TV broadcasters for answers - commercials before, after, or during (probably not a great choice) videos, a small superimposed ad (like soccer/football broadcasts that can't be interrupted for commercials), or framing ads (like some news/weather/preview channels) come to mind.

As far as ad targeting, I haven't seen the stats, but it wouldn't surprise me if a few hundred videos (or at most a few thousand) account for a large portion of the total views. Scanning these and assigning keywords and content characteristics wouldn't be that big of a deal. As a new video began to generate a lot of views, it would pop onto a "review ASAP" list so that ads could be targeted.


 9:46 pm on Sep 11, 2006 (gmt 0)

YouTube's primary problem is not its cost, but its lack of income

Surely these are hand in hand are they not.

It's cost is the primary problem because if this did not exist to this extent they would not be having to force advertising on the user so soon?

Likewise lack of income means they will be getting poorer (or rather their investors will be) by the minute at that monthly burn - hence the need to advertise.

Or am I missing the point if this quote?


 10:41 pm on Sep 11, 2006 (gmt 0)

It's all relative, I suppose, but one could view their cost as quite reasonable for a site doing the volume they do, while their monetization is lower than sites with similar numbers of visitors. Hence, the lack of profits is more likely attributed to revenue that's too low vs. costs that are too high.

Every business model is different, of course, so the one sure thing is that they need profits instead of losses.


 4:32 am on Sep 12, 2006 (gmt 0)

I am still amazed after all this time they don't have video ads leaders on every video clip.

They must be losing a fortune daily in bandwidth bills.

Maybe they are just trying to drive up the brand name against any competition and waiting for the big payoff in selling the company?

I wonder if their bandwidth is bought on credit and not real cash?


 7:08 am on Sep 12, 2006 (gmt 0)

Their player uses Flash. It should be pretty easy to integrate an video ad that ends in a clickable link.


 1:06 pm on Sep 12, 2006 (gmt 0)

I know this is an old chestnut, but things like YouTube still remind me of that South Park dotcom parody with the underpant gnomes. They have phase one locked down, they know how to get visitors, and the profit in phase three is clearly needed, but phase two doesn't exist and maybe can never exist.

The impression I get from reading financial articles about them is that the "business plan" of YouTube and other similar sites isn't really to make a profit, it's just to make as much publicity as possible and hope to sucker some big fish into buying them out.

It happened to eBay with its inexplicable but much-written-about takeover of Skype for example (the performance of Skype is still nowhere near justifying its enormous $2.6 billion purchase price, and there's no obvious synergies between a cheap phone service and an auction house). Another example (this time from the first dotcom era) was Yahoo buying broadcast.com for $5.7 billion.


 12:13 pm on Sep 13, 2006 (gmt 0)

massive problem with youtube - lots of people are using it to watch music videos. using it as some kind of jukebox. this is where a hella lot of the impressions are coming from. BUT this is all illegal. music videos shouldnt be there - when youtube are forced to be more vigilant in removing - they wont be there - traffic will go down INCREDIBLY. also youtube could face a suit at some point over this. youtube = heavily flawed


 10:31 am on Sep 15, 2006 (gmt 0)

massive problem with youtube - lots of people are using it to watch music videos.

It appears to be starting according to this AP story [mercurynews.com].

<edit>story appears to require registration, sorry. try here [foxnews.com]</edit>

Universal Music Group CEO Doug Morris said the wildly popular Web sites YouTube and MySpace are violating copyright laws by allowing users to post music videos and other content involving Universal artists.

"We believe these new businesses are copyright infringers and owe us tens of millions of dollars," Morris told investors Wednesday at a conference in Pasadena.

"How we deal with these companies will be revealed shortly," he said.


 12:07 pm on Sep 15, 2006 (gmt 0)

I guess they are trying to make the distinction between user-generated and user-stolen content. :)


 9:37 pm on Sep 17, 2006 (gmt 0)

Piracy is a big problem and lawyers must cost them a lot but placing a few minutes ads before any video would make users go away and watch videos elsewhere

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