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Monetizing YouTube
YouTube is starting to answer the question of how they intend to monetize the service. We all knew that banner and text ads weren't the solution for a video service. According to this piece from MediaPost, they've settled on "participatory video ads" plus "brand channels".
The participatory video ad is on the upper right in this screen shot and is a video ad for the new Rockstar Games offering Bully (which we'll probably be seeing a lot of this fall in our house).
When you click on that video, you'll be taken to a "brand channel", in this case the Rockstar Games channel where you will see more video ads for Rockstar products. Here's a screenshot of what the Rockstar Games channel looks like in YouTube.
This plan makes sense to me. It's a "native advertising system" that works well within the social viral community that YouTube has become.
Here's the video for Bully in case you are curious about the game.
Comments (10) | Posted August 23, 2006 in Venture Capital and Technology
Comments
I like the way YouTube is trying to position this as a more innovative and effective advertising method than allowing companies to wrap advertising around the YouTube content. Maybe they are right but I suspect the fact that many of the rights holders would go mad if YouTube started to monetise content which I'm sure they feel is up there illegally!
Posted by: Scott | Aug 23, 2006 8:30:37 AM
I know that this is a post about YouTube, but I have to comment about RockStarGames.
(They make the Grand Theft Auto series, in case you don't know.)
Their video games are ground-breaking, not because of the violence and sex (which are abundant), but because of the freedom they allow in their games. Go anywhere, do anything. It's pretty amazing.
It's like the old "pitfall" Atari game when you could go backwards.
Bully is a great concept. Looking forward to it and then new GTA.
Posted by: Rick | Aug 23, 2006 9:45:16 AM
Just to continue the tangent, Rockstar is indeed awesome.
And on topic, I think Youtube will be easier to monetize than Myspace, simply because the ads can become as viral and indistinguishable as the content uploaded by users.
I don;t know why more television producers and networks don't use Youtube. I've uploaded copyright protected stuff from So You Think You Can Dance that was wildly popular and it was watched like crazy. One of the clips was the 3rd most watched clip of the week and was highly rated. Dick Clark productions took down all the clips. I didn't understand why. Fox isn't rerunning the program so my clips don't compete with the TV show's ratings. The DVD isn't out so it isn't cutting into sales. You can't save the clips to your hard drive (to my knowledge). They basically just put the kibosh on some great viral marketing. Not only should they not take clips down, they should be the one putting up these clips themselves after each episode to get new viewers and create buzz before the airing of the next episode.
I predict that's how Youtube will be monetized. Networks will upload crystal-clear clips of the best moment's of the previous night's highlights onto Youtube, making the Youtube comments page and mass emails the modern-day equivalent of the water-cooler.
Posted by: T | Aug 23, 2006 10:10:39 AM
This was featured on NPR's Marketplace yesterday, for those interested:
http://www.npr.org/templates/story/story.php?storyId=5690056
Posted by: Michael | Aug 23, 2006 12:27:23 PM
This is a great advertising system *if* most of the video views happen on YouTube and not on MySpace pages or on other sites that embed the code. I featured on YouTube video recently and got 75,000 views in one day to my page with the video embedded. YouTube can't make a dime on that by putting ads on their own site.
The only viable way they can foster community by allowing people to repost movies AND have a viable business is by monetizing the thousands of views that happen on someone else's page. REVVER.com has a better handle on this at the moment.
Posted by: Jake Ludington | Aug 23, 2006 12:53:14 PM
I feel guilty for commenting off topic, so I feel the need to post about YouTube.
One part of me feels like they can really make a go of video-ads and have great success like Google did with Adwords. Video ads are definetly more attractive for branding purposes.
But then I think about the kind of companies that advertise via Adwords. They are usually cheap and quick ads placed in order to drive transactions.
The kind of companies that "brand" are generally bigger. The kind of companies that make video ads are generally bigger.
What company would want to brand itself next to videos of japanese game show contestants getting hit in the nuts?
I guess time will tell.
Posted by: Rick | Aug 23, 2006 2:31:35 PM
I just thought of a few other comments that I want to share...
I am surprised that YouTube, or another media entity, hasn't popped up to highlight niche videos on YouTube. i.e. dig for things for speciality videos. e.g.: a site that just has funny videos, a site with motorcycle burnouts, etc.
It's so easy to "use" Youtube's videos, it would be affordable to put together a network of specialty youtube sites.
I could see advertisers being interested in this model because less risks of putting their ads on questionable material.
Or, even advertisers putting together sites that dig for specific videos that help sell their products.
Posted by: Rick | Aug 23, 2006 3:49:59 PM
The trouble with that approach is that a lot of people watch Youtube video clips on blogs and websites that have embedded Youtube videos. They dont see the participatory video ads. AOL data shows that not a lot of people go to youtube.com home page directly ...
Posted by: zheng | Aug 23, 2006 8:16:36 PM
It's an interesting strategy, but I'm still a skeptic. I don't think companies will pay enough for these untried branded channels to subsize all of the free user-generated content. Too many marketing channels on YT and then the original concept gets underminded and viewers stop coming.
How much do you suspect was paid for the Paris Hilton channel? It was probably highly discounted by YT to "kick-start" the revenue model.
I can't imagine someone paying more than $50k/mo for a channel right now as an uneducated guess. That means there would have to be around 30 paid channels for YT to break even at estimated costs. Unless these initial attempts with Paris Hilton are *proven* to be a success, and create value to the brand managers, it will be hard for others to put their marketing dollars in this avenue.
Also, as mentioned above, there are too many views outside of the YT.com webpages. These embedded views cost YT money and without instream advertising, it can't be recouped.
YouTube really has just built up a very strong brand with undifferentiated technology that is easily replicated (although they have done a superb job with their data centers). If they use their brand to help others build up their brands then they might just end up diluting themselves into just another video portal of which there are 100's of others right now.
Posted by: Chris | Aug 25, 2006 1:50:12 PM
To make money with YouTube, this is what Google has to do...
On the most viewed clips (clips with, let say, at least 1000 views) (doesn't matter who posted them) you implement a 5 seconds overlay ad, that appears over the player and blocks out (darkens) everything else. (It gives a bit of time for the clip to load in the background as well).
This overlay is a 5 seconds spot (can't be longer than that and it doesn't link to a company website if you click on it. It's like a really, really short TV spot. It can be a still picture for outfits with very little budgets...)
Now, people don't like ads... but they like GAMES and they like to COLLECT stuff.
Each overlay ad is a mini 5 seconds GAME. You have three colored dots on the overlay. The viewer clicks on ONE of them. One is a winner, two are duds. If you're lucky to pick the winner (you only have one chance) during the 5 secs, you receive a TOKEN that is automatically added to your YouTube account. (It encourages you to stay registered...)
Now, you COLLECT these tokens. If you win a certain number of similar tokens, you can EXCHANGE them against full-length HD Hollywood Films or TV shows on YouTube. The fun part could be that you have different categorires of tokens. (Some would be for specific film genres or just for one TV show and some could be really hard to find, worth maybe ten tokens, etc.) (Tokens are generated randomly by the system.)
Now, you have the problem of guys posting shows and seeing Google make money off their film. Well, they need to be rewarded too. For a succesful posting (ie lots of viewers) they receive TOKENS as well to be exchanged to watch high-quality HD movies or TV shows...
Now, these HD movies or TV shows can also be sponsored with a longer lead-in spot... That's even more money for Google.
Now, we have the problem of big brand names not wanting to have their spots stuck on "Jimmy and his weird cat"... Well, they could "control" where their 5 Secs. spots go by teaming with content suppliers through YouTube. Example, a Coca-Cola campaign with Viacom clips... Viacom takes all the succesful shows they own like, as an example, "Spongebob". They cut out little "gems", two to three minute clips and they post them on YouTube to watch for free... Viacom via Google sell their 5 second spots to Coca-cola. Everybody is happy. The viewer, who enjoys these mini-clips, can even link to the full episode of Spongebob on YouTube. He can pay by redeeming TOKENS or he can PAY with a CC for the full episode or combine both. (It's all streaming! It's like TV a la carte.)
Now, what about the "Jim and his weird cat" clips. Who pays for these 5 secs ads? Well, it's like Google's Adsense, it's small outfits who purchase so many spots. You can buy a thousand spots or ten thousand spots to be randomly placed on clips or based on the clip's TAGS. The outfit supplies the spot or the still and pays Google directly up front.
A system like this is not that difficult to implement. It's fun for all involved. Everybody is a winner especially Google who makes tons of money from the big guys but also... most importantly...from the long, long tail of all the little guys. Viewers are hooked to YouTube forever!
Here, you have it.
Twowan,
(If Google wants more ideas like this one, they can contact me. I'm the guy behind laboratoryfilms.com)
Posted by: Twowan | Nov 6, 2008 7:18:36 PM
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