About a year ago I questioned YouTube as a sustainable business. Hulu was fresh on the scene and making the leader in amateur video look… amateur. YouTube had only started revenue sharing with some of its most popular users, and did not have licensing for a good chunk of its content. Hulu, on the other hand, had just purchased licensing for thousands of episodes of studio produced video (aka TV shows). Already faced with turning around a deficit, how could YouTube compete?
Volvo’s first page ad takes over YouTube in April 2009. The popular video sharing website is generating more revenue than ever from advertising.
According to Google, YouTube is almost in the black. “In the not long, too-long-distant future, we actually see a very profitable and good business for us,” Google Chief Financial Officer Patrick Pichette said last month. Not bad for the third most popular website in North America! Sarcasm aside, new advertising platforms have put new life into a once helpless looking situation. In-video ads have been a hit, and big budget companies like Volvo are starting innovative campaigns (see right).
Ads, however, are only a small part of the story. Having Google’s top programmers at its disposal for the past three years has certainly not hurt the YouTube website, which is one of the best. It’s up in the technology race, with video quality and download speeds steadily improving. Social networking tools like messaging, friending, commenting, rating, favouriting, are also up to par, as is the ability to embed and share the video player on other websites. Most impressive of all, in a relatively short period of time YouTube has managed to build a healthy community which is loyal to the website.
But why is there any loyalty? Why is it popular? The website is very user friendly. It has probably pushed thousands to get high speed connections and buy faster computers. For many YouTube is the first website enjoyed regularly. But really, the answer is traffic. YouTube has more of it than any of its competators – by far. Hulu is blocked in every country except for the USA. I’m not supposed to be able to watch it here in Canada! YouTube is popular in many countries, and at about 100 million Americans per month, has nearly 10 times the unique audience of Hulu, in its only market (source: Nielsen). Not only that, but there is also a financial incentive to posting video on YouTube. The revenue sharing program that had just been introduced a year ago is quite lucrative for some users today, with some claiming upwards of $25,000/month.
Thanks to YouTube amateur video is more powerful than it has ever been. It has created celebrities, launched businesses, and influenced politics. I’m not sure if that is a good thing, but it’s a fact. There is definitely a place for Hulu (which is still profitable by the way) and other professional content on the Internet. The creators deserve a way to optimize it here and get paid for their work. Does this create a conflict of interest with YouTube? Yes. Will this cause the eventual demise of YouTube? Perhaps. Regardless, if amateur video stays hot and the YouTube website is kept up to speed, it isn’t going anywhere.