Recently we talked about the upstart sensation, YouTube. As a social phenomenon and a growing entity, YouTube's rise to glory has been nothing short of meteoric. In just one year YouTube has taken its business from zero to pumping out more than 35 Million streams per day, and it's still growing. That's pretty darn impressive, but, as the immortal Rod Tidwell once said, "Show me the money!"
You see -- there's a fairly developed pattern when it comes to replacing existing media outlets with their internet counterparts. The first step is to see if people will buy what you're selling when the cost is zero. YouTube has clearly been successful in that regard. In fact, their success has even convinced media giant AOL to create their own (nearly) feature-for-feature knock-off (see: http://communityvideo.aol.com/). [Disclaimer: this publication's parent company is owned by AOL.]
However, using venture capital money to subsidize the trafficking of copyrighted material is just the first step. Eventually, the fledgling business will have to hit step two: making money. It's there where the wheat is separated from the chaff. It's there where we find out if a new medium will enjoy long-term success or fizzle away like the pet rock.
Take blogs for instance: While blogs began as simple online personal journals, it didn't take long for enterprising souls to recognize that blogs held much more power than simply sharing your cat's diet with your 12 "readers." Yes, the majority of the blogs out there are still "by the people for the people." Yet, the medium has also spawned quite a few commercial sites (this site included). It's this commercialization that ensures the future of the medium.
But where is YouTube's legitimization? More specifically, where is the path to profitability? Millions of streams per day is quite impressive, but it's also quite expensive. Estimates for YouTube's traffic have been pegged as high as 200TB per day. No, that 'T' was not a typo; that's Terabytes. Bandwidth costs alone most likely approach one million dollars a month. Add on top of that the cost of running a service as massive as YouTube's, and you quickly come to the same conclusion: It's time for YouTube to stop growing and start making money.
Stop growing? Yes, stop growing. YouTube's success might just be killing them. They've already gained the elusive "mindshare." People are familiar with YouTube. People know YouTube. Any further growth is just an ego-quest; it's not a quest for money and it's certainly not a quest for a sustainable business. Furthermore, added growth might just hinder long-term aspirations. With the majority of their traffic falling into one of two camps: a) illegal traffic (e.g. the much-talked-about "Lazy Sunday" clip) or b) traffic which will never make them a cent, it's time for YouTube to take a step back and ask the question "How do we attract more quality and less quantity?" The answer (as always) is money.
There's an old eBay story (whether or not it's apocryphal I can't say) that goes something like the following: it was when eBay started charging for its auctions that the site became useful. Until that point in eBay's existence, "good" auctions were often hard to find amidst the sea of "bad" auctions. By adding a little money into the mix, serious buyers were able to find serious sellers and vice versa. While not exactly the same thing, it is time for YouTube to start courting quality content producers.
"How might this work?" you say. Well, I'm glad you asked.
This past week I must have watched Judson Laipply's "Evolution of Dance" clip five times. It was funny. It was quite funny, actually. It's a shame that Judson won't get paid for that work. Imagine, on the other hand, if YouTube had placed an advertisement before that clip and paid Judson for every time that clip was watched. Take this a step further. Imagine if you, as a website owner, were also given a cut of the advertising revenue every time someone watched that clip on your website. All of a sudden you've got a system whereby quality content owners are eager to submit their work and websites have an incentive to find the best quality clips to feature on their sites. It's the elusive win-win-win.
There's often an attitude that advertising ruins things. While it's true that ads can be annoying, ads or, more to the point, the money they represent have an uncanny ability to drive quality. By giving people and organizations proper incentive to use YouTube's distribution system, money could help to achieve the goal of making quality content extremely web-portable. This in turn, would drive YouTube's ultimate success.
If you have comments or suggestions for future columns feel free to drop me a line at email@example.com.