YouTube, you’ve come a long way. As 2025 marks both YouTube & WatchMojo’s 20-year anniversaries, my co-host & colleague Rob Flis kicked off episode 1 of “InsideMojo.” Serving as a companion piece to our forthcoming 3rd documentary entitled Just Watch: The Rise of the Storyteller/Entrepreneur Class, each week we will dive into the origins & evolution of YouTube and share some of the highs and lows from WatchMojo’s roller coaster ride. As YouTube has stormed to become the second most popular podcasting platform after Spotify (just as it became the second largest search engine post launch), I couldn’t not help but appreciate how far YouTube has come, since I began to cover it for TechCrunch and try to make sense of this nascent space called digital or web video.
As early as 2006, but certainly by 2011, YouTube became WatchMojo’s main distribution platform as the future was becoming clearer and clearer. Back in those days, YouTube co-founder would even reply to inquiries!
1. It’s YouTube’s World, We Just Stream It
Today, YouTube dominates streaming, which is consists of On Demand and Linear/FAST (or Free Ad Supported Television). Within On Demand, the business model can be Advertising or Subscription-based (hence AVOD & SVOD).
2. First to Market vs First to Scale
One thing I’ve learned is that the macro-environment drives everything in the economy, in any industry, and that includes competition and innovation. When rates are low, money is more accessible and costs less. When GDP is growing, business leaders have a sense of urgency to capitalize on opportunities. 2022 saw the end of ZIRP, or Zero Interest Rate Phenomenon. But by the mid 2000s, the dot com bubble bursting and Nasdaq crash were distant memory. Investors had begun placing their bets. Digital Advertising was mounting a comeback: when AOL acquired Advertising.com for some $400M, people paused and asked whether there was something about the Web after all. When AOL hosted Live8, streaming live video around the world, I took it as web video was about to have it’s coming out party for good.
3. Macro landscape: media, content, advertising, video, AVOD, YouTube
The Internet has already surpassed television as king of all media:
and naturally, advertisers have followed audiences where they are:
But in a world where 80% of ad dollars flow to a select few major tech platforms – Alphabet (Google/YouTube), META (Facebook, Instagram), Amazon, Microsoft – everyone finished 2024 realizing they were under-indexed in video, namely, YouTube, which has gone from pariah to belle of the ball. The first time I alluded to this metamorphosis was in 2012 when covering the industry for Media Post (you can read the article sans paywall here). The LA Times got the memo in 2021, Hollywood is slowly coming around.
Too little, too late? No doubt YouTube would not be what it is today had it not been acquired by Google in 2006, in what I referred to in 2011 as the single greatest media M&A deal of all time:
4. Alphabet’s Total Domination
Today, YouTube is even more dominant in video than Google is in search (market share notwithstanding, Google won for these reasons but its dominance stems from the triple crown of 1) superior product, 2) distribution moat, 3) built-in monetization (Adsense/Adwords); YouTube won in video and is dominant as it has the largest collection of broadband programming, managing this is an altogether different beast than managing textual content and directing the glow of traffic. What YouTube executed on is simply on a scale and scope different than any other technical and commercial endeavour: it usurped from television what cable began to gnaw away from network television. What the portals Yahoo, MSN & AOL did to cable, YouTube & Netflix did to TV and portals.
The impact of Cable Television (MTV, ESPN, etc) on network TV (ABC, CBS, NBC, FOX) was obvious:
But before discussing YouTube, it’s important to note that as cable proliferated, total consumption of content mushroomed with new programming.
5. What does “Content is King” Even Mean?
When Sumner Redstone stated that “content is king” he referred to the dynamic that new distribution platforms/outlets create new demand for programming. Bill Gates then subsequently referred to this mantra when investing in Corbis, a Getty competitor that focused on stock media.
But given that new distribution came with uncertainty and risk, oftentimes it was not the incumbents who capitalized, but new belligerents with nothing to lose. This is the essential theme of Clay Christensen’s premise of The Innnovator’s Dilemma.
Indeed, most of the successful publishing brands on YouTube did not reinvent the wheel, but merely adapted it to a more fast-paced programming world. Some examples:
But whereas Netflix is the leader in SVOD, or subscription video on demand; YouTube is the king of AVOD, or advertising video on demand. But as cord cutters & cord nevers become larger segments of the media world, connected TVs allow for audiences to watch linear programming via FAST, or Free Ad-supported Streaming TV.
6. Reinventing the Wheel, aka TV/Cable? Or a Brave New World?
THE TAM, or Total Addressable Market in video online is massive, and can be broken down in a few ways:
Total OTT = Streaming + Downloads (ie downloads account for only 3%)
Total OTT = AVOD + SVOD + TVOD
Total OTT = VOD + FAST Linear
In FAST, we have seen different ways to tackle the opportunity, namely, via:
- Apps: Tubi, PlutoTV
- Devices (dongles): ROKU
- TV manufacturers: Samsung, LG, Xiaomi, etc
The size and potential of online video is massive:
- The OTT market was worth $121.61 billion in 2019 and will grow to $1.039 trillion by 2027. (Allied Market Research)
- In Q4 2020, 239 billion hours were spent using video streaming apps on mobiles across the globe. (AppAnnie)
- When streaming video, 65% of the time it’s done on mobile and TV apps, rather than on browsers. (Uscreen)
- The most popular OTT TV device as of Q1 2021, was Roku, with a 37% share of TV viewing time in North America. (Conviva)
- There was a 115% increase in OTT streaming to TVs between 2020 and 2021. (Conviva)
- Of all the revenue made in the OTT market…
- 51.58% comes from advertising video-on-demand (AVOD)
- 40.16% from subscription video-on-demand (SVOD)
- 5.1% from pay-per-view, known as transactional video-on-demand (TVOD)
- 3.16% from Video Downloads (EST) (Statista)
- Even though advertising generates 51% of the total revenue in the OTT market, subscription customers generate nearly twice as much money per user than users who use ad-supported streaming services. (Statista)
- The SVOD market is expected to grow by 52% by 2025, whilst the total OTT revenue is predicted to jump 53% in the same time, totaling $272 billion. (Statista)
- Netflix is the biggest OTT service in the US in terms of revenue, with 30.8% of all subscriptions heading their way. (eMarketer)
- Of the people who watched live-stream content at least once a month in the US, the top three categories of content are breaking news at 26%, comedy with 25%, and how-to videos are live-streamed by 21%. (Vorhaus Advisors)
- With 38 hours of content consumed each month, we’re spending nearly a full work week watching videos on mobile apps. (AppAnnie)
But regardless of whether we are discussing FAST or On Demand (be it AVOD or SVOD), the bottom line is that YouTube is the undisputed king:
AVOD vs SVOD
I’ve covered Netflix quite a bit, I remain bullish as a sizeable investor. But Netflix was at most an evolutionary creation which just changed small details of consumer behavior.
7. YouTube is the Most Disruptive Product of All Time
Apple’s iPhone may be the most revolutionary product of all time, but YouTube is the king when it comes to disruption. It wasn’t, however, the first to attempt to win in the market.
Inasmuch as we weren’t the first to program for these new platforms:
While Netflix was evolutionary, YouTube was revolutionary in that it changed everything about media:
- A) Definition of quality & who is a star disrupted programming, talent, casting – the entire bedrock of Hollywood: development, casting, production got flipped on its head.
- B) Embeddable videos were disruptive to distribution: we take this for granted now, but in 2006 when a user could click “copy” and paste a line of html code on another website, it was a massive change and helped YouTube go viral.
- C) Truview/skippable ads were disruptive to monetization: audiences now controlled not just what programming they wanted to see, but what ads they cared to watch. Google preferred aka YouTube select further changed the platform’s earning potential for creators.
Ad supported media remains the larger opportunity: There are a plethora of subscription-based entertainment and information sources & some users now spend more time on those, but there are more ad dollars being spent on media… That “disconnect” creates a huge opportunity for ad-supported media with an efficient business cost model.
It feels funny when people talk about YouTube to me, because for the first decade when I focused on the platform, people were generally befuddled, partly because there was absolutely no economic incentive to embrace it:
Today, that graph is outdated, with Disney blowing up its business model to put its best offerings online! Timing is critical in entrepreneurial success. Nowadays, being on YouTube is seen as a no-brainer, explained by online video being the fastest growing segment in all of advertising.
8. Only In Silicon Valley Would YouTube Be Possible
Indeed, whereas Hollywood viewed itself as the centre of the planet, Silicon Valley positioned itself as the centre of the universe. An entire generation of entrepreneurs set out to “move fast and break things,” not surprising, since “it’s easier to ask forgiveness than to get permission” according to St-Benedict.
What YouTube got right was in focusing on what viewers wanted, knowing that marketers would follow audiences, as would invariably content producers, too.
YouTube has had many inflection points, the introduction of Google Preferred, today known simply as YouTube Select is key: separating certain more premium channels from the masses, letting RPMs rise for creators and giving advertisers a bit more brand safety and content “surety.”
The Web Shrinks Markets
As history shows that the advent of cable grew the total size of the television pie, it’s not surprising to see the Web has expanded the total addressable market in media & advertising. But the fundamental truth is that the Web shrinks markets by tackling inefficiency.
YouTube has grown by stealing ad revenue from incumbents, who were caught asleep at the wheel.
The leader in desktop video dominated mobile and is now going to win CTV – Tubi/Pluto & Roku/Samsung won the early games in the best-of-7 series called video.
8. “All Platforms Are Equal, but some are more Equal Than Others“
YouTube should not be paying for Facebook’s sins in publishing, but some experts tend to throw out the baby with the bathwater.
Years ago, when we’d get asked about our “revenue concentration” on YouTube, being more exposed to Google’s video platform was seen as a negative even though to me, from the early years, it was clear to spot YouTube’s potential, as “content emerged as the new software” (with minimal distribution costs), YouTube evolved from pariah to bell of the ball. Here’s a keynote I gave at Vidicon in 2019 covering YouTube’s evolution.
Like sheep, many hoped for revenue from Meta’s Facebook or pinned their revenue diversification hopes on TikTok. Today, Facebook is seen as anything but reliable and the spectre of a ban on TikTok makes people better appreciate YouTube’s emergence as the leading media & entertainment platform in the world, having shelled out tens of billions of dollars to creators.
The challenge is that you cannot buy some of the most popular channels in the world because they belong to the record labels, or managed by WWE, etc. Others are influencer channels, a profile that is not obvious to a corp dev executive or an institutional investor. Mr Beast deserves credit for building a media organization, but if he’s MIA, there’s not much value left behind. Forbes recently ranked the top earners, but suspect they focused on individual creators, since in 2023, WatchMojo’s earnings would have put us in this “mix.”
9. YT is a Billion Different Things to 2 Billion People
Once the Web came along, the outcome was inevitable: TV’s impact peaked and viewership changed for good.
10. “The best investor is a social scientist”
As Michael Milken would say “The best investor is a social scientist,” inasmuch as kids who grew up reading comic books went on to run Hollywood, Silicon Valley, Madison Avenue and Wall Street, kids who grew up on YouTube are starting to become decision-makers, and with that we will see an even more tectonic shift in how ad dollars and investment capital is allocated.
11. Innovator’s Dilemma
When Viacom brought in the lawyers to steer the ship, they were DOA. MTV became a shadow of itself, especially once cable was disrupted by the web.
In my experience, I see this isn’t limited to “executives at big media.” For example, my investors (who joined us in 2021, but like others would’ve likely ran for the hills until circa 2016) have been great, but the reality is investors will never truly share an entrepreneurs’s time horizon let alone one’s risk profile. We jump off mountains and worry about safe landings on our way down. Investors are not like this. Neither are executives.
The media world has changed for good, a growing malaise exists due to the Trends & Themes prevalent today, namely the four themes that we have witnessed over the past 20 years have now come together and created an environment where media is more challenging than ever.
i) the professionalization of UGC: mobile recording and editing equipment means anyone is a producer, and the quality between professionally produced content and user created content is not discernable.
ii) the democratization of distribution: before a media company leveraged distribution to launch new publications; today audiences do not care about those relationships and choose editorial voices based on categories & POVs that appeal to them. Zero synergies to cross promote/sell new publishing brands.
iii) the rise of programmatic advertising: advertisers will reach audiences anywhere, the power of a publisher to serve as a gateway to a possible consumer is nil. Data won.
iv) the way media franchises are now created. Successful Media Franchises are serendipitous and the overnight successes are 10 years in the making. In the past, we talked about “moneyballing” our way to success, but even that was unfair and didn’t take into account the patience, diligence and attention to details with regards to content creation, community building etc. Successful media franchises over the past 20 years are not exactly hatched by market planners and analysts, but by ambitious storyteller/entrepreneurs who find an area they are obsessed about and then commit for years:
– First We Feast’s Hot Ones (Complex)
– Barstool Sports
– Joe Rogan Experience
-Acquired podcast
– Lex Friedman
– Famous Birthdays
– WatchMojo
– Mr Beast
– Dude Perfect
– Dhar Mann
– Ms. Rachel, etc.
If entrepreneurial success boils down to Ambition, Vision, Execution, Persistence, Luck, Timing, Focus, Resilience… I would suggest that creative success requires Vision, Storytelling, Tinkering/Iteration, Repetition, Consistency, Frequency, Authenticity, Authority… You simply can’t MBA yourself onto a hit: it takes patience, serendipity and luck!
The newest theme, Artificial Intelligence, presents an opportunity to do what Lucas Arts did with CGI or Pixar did with animation, but merits its own series of articles (oh look at that) and analysis.
Surprisingly, analysts and executives missed out on the greatest shift in media & advertising, and that being programmatic revenues, which is defined simply as targeting audiences based on data, behavioural targeting and context. Even though programmatic revenues are the holy grail that come with higher margins and less variance, oddly enough media companies sought to maintain their traditional ways to sell – relationships, schmoozing, insertion orders, trafficking creatives, fax machines & natch, three martini lunches – which only made advertisers shift ad dollars to these behemoth platforms quicker.
12. Brave New World
The world has delivered on the vision we saw 20 years ago, and morphed into a brave new world, where after shunning content for as long as they could, the major platforms (owned by big tech) began to license content and underwrite production. The worlds of content production/ownership and distribution began to merge into an eclipse.
13. What Inning Are We In?
The Game/Series ain’t over, per se, but as we have seen, once someone develops a big lead, the game may as well be called.
14. The Empires Strikes Back?
Not only does Disney, Comcast et al. continue to invest in droves:
Their investments grew during ZIRP:
Traditional media still invests a ton in original programming, but with the ZIRP era over and Wall Street demanding to see profits from media corporations’ investments in streaming, budgets are tightening and productions are scaled back from the era of Peak TV.
Big media firms spent the first quarter century merging to get bigger, partly to counter the growing shadow projected by major tech firms like Alphabet (Google/YouTube), META (Facebook), Amazon, Microsoft, et al. who began to eat away at the lucrative advertising revenue streams they benefited from.
15. Build and Buy: “what got us here won’t get us there”
Throughout the past decade, we’ve certainly seen “strategics” try to adapt to this brave new world, but to no real avail.
- traditional media companies: Disney, Paramount, Warner etc were big buyers of companies like Machinima, Fullscreen and Maker. They all invested in their own streaming platforms. Today, Disney has parlayed its superior IP and bona fide tech chops (they acquired MAB which was MLB’s platform) to build Disney+ as the only real competitor to Netflix’s dominance in SVOD.
- new media companies: Buzzfeed, VICE are a shadow of their former selves, right now. They are struggling for survival and relevance, but kid yourself not: in a few years both will be leaner and meaner, and their future lies firmly in video (Buzzfeed shut down News, while Vice altogether discontinued publishing articles on its owned-and-operated website to focus on distributed media, and the licensing fees that come with it).
- marketing focused companies: Ziff Davis, Red Ventures are too value-oriented to really see the value (longer payback period, more upfront investment) in video. Sure Ziff owns IGN which produces videos, but for bottom line oriented publishers, video is a big ball of oil they rather not get too messy playing with.
- digital video centric new media companies: Trusted Media Brands was known for its legacy brands but pivoted by acquiring Jukin, who had cracked a certain code by programming around user-generated content (UGC).
- ad networks looked to content as a possible differentiation method in the early/mid 2010s, but never really took content seriously. They are in the intermediation business, and more power to them. Content is messy.
- telcos experimented with content and divested (AT&T, Verizon) and in Canada, Rogers is only focused on hockey rights while BCE is doubling down on their 5G capex needs, limiting Bell Media’s scope. Altice acquired Cheddar, who focused on live news programming, which is very tricky to build a profitable business around, especially online on-demand (vs linear). But for telcos, who thrive off data revenue, video is a normal extension of their offerings.
- entertainment/content streaming platforms needing original content have relied on licensing (i.e. ROKU, Disney, Apple) or developing their own (Apple), but this cohort is driven by vanity as a means to elevate and differentiate their offerings.
- roll up efforts: Many have indeed attempted to roll up media brands to replicate what Viacom did when it owned MTV, VH1, BET, Nickelodeon, etc. Candle Media raised a warchest and focused on celebrity-associated IP owners, i.e. Reese Witherspoon’s Hello Sunshine, etc. While again critics may argue that it overpaid for assets like Moonbug, reality is they also bought quality assets that can serve as building blocks. I know Warren Buffett said it’s better to buy great businesses at fair prices than buying fair businesses at great prices, similarly, it is better to acquire great businesses and overpay a bit, than buying crappy businesses at a discount. DEFY Media was amalgamation a lot of sub-par brands while positioning itself as the next Viacom. It was not. Lunar X and Electrify are the latest belligerents in that racket. Time will tell how they roll-up assets, execute, and grow.
- DTC (direct to consumer) firms realize that focusing on performance marketing efforts will only get you so far. Inasmuch as AMEX bought travel content publishers, you have seen other DTC marketing firms buy content platforms as it is no doubt a lower marketing approach.
They say history doesn’t repeat itself, but it does rhyme. It remains to be seen if anyone can build not only the next Viacom but possibly the next Liberty Media, but with a front row seat to this ongoing revolution, what a long strange trip it’s been… join us for the next episodes of Inside Mojo and I hope you enjoy the forthcoming Just Watch documentary later this year.
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