I’ve recently written about how YouTube went from pariah to the only game in town, arguing that the site will only get stronger in years to come. Seeing video content producers large and small embrace YouTube as the centerpiece of their distribution strategy makes a lot of sense, but some caution and common sense would be appropriate.
There are two main drivers explaining the sudden embrace of YouTube:
1) YouTube is far and away the most popular place where viewers watch video content, and advertisers tend to follow audiences.
2) YouTube paid $100 million to some content owners and guaranteed them considerable revenue, allowing some producers stay in business while giving others a reason to produce new content.
Always the devil’s advocate and contrarian, I now caution people from getting too enamored with YouTube as the be-all-and-end-all, because regarding point 1: while YouTube is popular in aggregate; there’s still no real rhyme or reason why a given video generates more views than another (and, it’s certainly not a function of “quality” or production value).
And of course, there’s nothing suggesting that point 2 will become a constant in the years to come.
Google as Sugar Daddy
As background: over the past two years Google invested $100 million in guaranteed revenue deals securing exclusive ad inventory against the content of some of the world’s best-known media brands (for example, the Wall Street Journal) as well as some of YouTube’s more popular endemic producers (such as Phil DeFranco). It spent an additional $200 million promoting these channels, in a move that could mean many things.
Either way, when the time came for renewals, YouTube focused only on some of the channels, favoring auto, humor, music and sports programming (I’ve spoken off the record with folks from a dozen of those channels, some of which got renewed and some who didn’t). Time will tell if those left standing at the altar will see the merits in maintaining — let alone updating — their channels. Despite the promise of higher CPMs through video, the net CPM that producers receive is alarmingly low. If Google isn’t footing the bill, then it’s not clear that there’s an incentive to be producing said content.
But let’s back up a second and recall that YouTube belongs to Google.
History’s first lesson is that once upon a time, Google sought to diversify from its reliance on paid search advertising by investing and acquiring a plethora of products and services. Then, almost overnight, the tide turned and Google decided to kill a litany of those products. Knol,anyone?
Now I know what you’re thinking: none of those kiboshed services matched the importance of YouTube. That’s correct, and in no way am I arguing that YouTube itself is in any danger. After all, YouTube gives Google a more potent and market-dominating asset in video than it has in search via its namesake search product. However, I do believe that what is making video producers so ga-ga over YouTube – the guaranteed revenue Channel deals – is by no means a slam-dunk.
History’s second lesson is that Google’s DNA is in a democratic meritocracy where partners (be it Web properties carrying Google’s search box or their paid search ads) make money as a function of their traffic and the revenue they generate for Google. Online video continues to grow ferociously, but it is actually starting to mimic advertising in general. Once the land-grab phase is done with (and you can argue that with YouTube’s dominance all but secure and number 2 Hulu’s future up in the air, it sort of is), then Google’s “revenue share” mantra may eventually permeate over to YouTube.
Since companies are always slow to act and slower to react, this means that by the time many of the producers are scaling their made-for-YouTube production, the other shoe will — or rather, may — fall and they will be left holding an empty bag.
It boils down to balance: YouTube has to be central to your distribution strategy, but if you view your content as a Lotto ticket in the YouTube sweepstakes, then you’re embarking on a losing strategy.