Image via CrunchBase The Financial Times yesterday (11/17) had two very interesting, though highly predictable articles on the state of the YouTube business model in recent months (yes, that is business model, not pageviews) which I thought I would share this morning...
First, the British newspaper profiled the rise of rival video portal Hulu, a joint venture between NBC and News Corp ("Rival forecast to catch YouTube") which serves only professionally produced content as opposed to the user-generated content (UGC) that made YouTube famous and earned its founders their $1.65B exit when the site was acquired by Google two years ago. Arash Amel is quoted in the FT as forecasting Hulu to match YouTube dollar-for-dollar in ad revenues during 2009. “YouTube is in a very tough place right now,” said Mr Amel. “Most of that user-generated content is worthless or illegal. The next 18 months will determine whether or not it was just an expensive mistake for Google.”
This would be particularly significant considering the massive advantage YouTube has in total user traffic, with 83m unique viewers in the US during September alone, compared to merely 6m unique views for Hulu, according to market researcher Nielsen. Google has taken a very gradual approach to scaling, monetizing and enhancing the content base of its very expensive social network, which is what YouTube has basically grown to become since it was launched in 2005. Google has taken the community-driven development approach in their streaming media endevors to-date, with little concern evident (at least on the face of things) over the exorbitant loses YouTube has generated day-after-day as millions of people continue to upload and share their experiences using the free hosting space that each registered YouTube user is alloted.
The paper follows this bold industry analysis with a complimentary evaluation of YouTube's core business model ("YouTube's popularity fails to sway advertisers") and prospects for improving on its dismal record of convincing ad buyers to take a gamble on its almost universally amateur and wholly unpredictable library of home movies and pirated Tivo recordings. Tracey Scheppach, video innovations director at Starcom, a media agency is quoted in the article asserting, “YouTube hasn’t done a great job justifying why advertisers should migrate online.” Clearly there was little thought among Google management dedicated to how YouTube would eventually return its investment to the company prior to gobbling the site up for 10-figures in 2007. Without a really great thought soon, the million-dollar per-day cash burn and they swelling database of worthless content to manage may be too much for even Google to bear in these tough times.
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