March 13, 2006

Fast videos + quick download + easy proliferation = YouTube’s success

Posted in Technology at 2:39 pm by antonello

And we’re back. Apologies for the delay. Back to the fray!

YouTube has been at the center of every viral video epidemic since Lazy Sunday exploded with the help of its servers. Doff your cap to them for it. YouTube has far outdistanced yahoo, and google video is lagging behind too. Flash’s video compression is the clearly superior product since its release, both in performance and ease of integration. YouTube capitalized on FLV along with increased broadband penetration to make the site the place online for videos. Community uploads keep the content liquid and plentiful. And the best part: each video has its own unique URL unique enabling better viral transmission than a fishnet condom.

So what do they have planned? I’ve been curious how they plan on making money, and on their strategy in general. Thankfully Newsweek asked this question before I did.

As far as I can suss it out, the YouTube strategy comes down to this:

Keep the offering free for now. YouTube has at least 3.5 million in start-up funds, so the company is set for the time being. Make YouTube become the place for video on the web and back that up with usage numbers (which essentially is already the case). Then, you can start charging for ads in the videos. I have no idea if that’s viable – that article made a good point that Google and Yahoo! can keep their services free by supplementing the losses with revenue from elsewhere. Advertising would open YouTube up to a bunch of legal issues. Presumably, there are other possible revenue streams – take for example, an iTunes model – make exclusive deals with NBC or 20th century Fox to show pilots or trailers or exclusive interviews.

Also inherent to this strategy is YouTube building a very cozy relationship with corporate sponsors. A novel approach, but one certainly warranted by the hostility that the web has generated in the past.

(Aside: My mind jumps back the magical WWW, around 10 years ago, where you could still find fantastic fansites for the Simpsons replete with images, wav’s, avi’s, etc. Then came the cease and desist orders from Fox. Undoubtedly readers will have their own bitter experience regarding the squelching of their favorite online places. Please feel free to include diatribes below.)
Following the unbelievable success of Lazy Sunday, NBC requested that YouTube take it off their site. They obliged:

YouTube execs point out that, unlike Napster, they control what’s on their site and can boot users who are breaking the law. “This is not 1999. Those guys [Napster] were renegades. They thought no one could touch them,” says Kevin Donahue, YouTube’s VP of marketing and programming. “We want to be in business with content owners, not in conflict.”

(Aside 2: Who is NBC kidding? Without YouTube, Lazy Sunday would have died a quick, lonely death as another piece of SNL filler. YouTube enabled quick transmission all over the shop.)

By cozying up to the big media companies, YouTube is a “good corporate citizen? – it’s not rattling cages or swords. It’s not trying to destroy old media. YouTube’s policy allows them to play the role to a tee.  YouTube can excise videos which don’t appease the media masters without the backlash of selling out because it sold out from the beginning.  Of course, as soon as YouTube takes something down, the community can respond by throwing the nasty clip right back up there.  YouTube gets to take the cake and eat it too.
YouTube also reaps an additional benefit every time it pulls a video: free publicity. A press release that announces the deal between NBC, for example, legitimizes YouTube as a (if not the) major player in online video. And YouTube gets its name all across the media. You can’t buy advertising that good.

Even if YouTube’s strategy isn’t viable, or if google video or a new offering surpasses YouTube altogether, by the end of ’06, YouTube is set up perfectly as an acquisition for a major player who is currently watching from the sidelines. AOL maybe? Seems like something they’d do when not charging for email.

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1 Comment »

  1. […] Well, sort of old.  The last entry recalled some work I put together for a blog that I never bothered following up with.  Check it out here, or read the rest after the jump. […]


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