So finally it happened. Two weeks after Mark Cuban suggested that only a moron would buy YouTube, because of the threat of copyright lawsuits, Google set out to prove him wrong, paying $1.65 billion for the video-sharing site. What are they thinking? Well, my colleague Nick Nyhan, CEO of Dynamic Logic, thinks Google is seeking to broaden its scope to appeal to more traditional brand marketers who see little benefit from text-based advertising.
Unlike Google, YouTube already supports banner ads and sponsorship. Quoted in MediaPost’s Online Media Daily Nick suggests, “Google knows it’s had phenomenal success with text-advertising and now it wants to expand that into new forms of display and brand advertising.”
Accepting Nick’s proposition—will Google be able to succeed with video advertising?
Earlier this year, I posted my thoughts on Google’s possible aspirations to become the mega-network of the 21st Century. (Click here to view post.) The basic concept of GoogleWorld was proposed at an ARF workshop exploring the future of advertising. For the price of seeing ads, Google would allow anyone access to anything, anytime, through free wireless connectivity. Essentially it was a back-to-the-future scenario, with Google taking the place of the broadcast TV networks of the 1960’s. Well, the purchase of YouTube would appear to bring that vision one step closer.
Merrill Lynch estimates that YouTube’s content-sharing technology is worth around $100 million. So Google will pay $1.5 billion for a brand name and a vast audience. Will this investment pay off for Google? Only time will tell, but the biggest stumbling block may turn out to be neither the technology nor the content, but the audience itself.
Tweens and teens spend a lot of time watching videos online, but as they grow older, they will probably have less time to devote to this activity. After all, while I enjoy watching a funny or intriguing video when someone sends me a link, I don’t have time to surf through hundreds of clips to find one or two that are worth watching. And even if the young people of today do keep up with their avid viewing in years to come, will they be willing to watch the equivalent of a TV commercial before, during or after viewing the video they really want to watch? (Check out “Gone in 5 Seconds…Please” for my answer.) It is perhaps noteworthy that YouTube does not integrate video ads into its content; a user must choose to play the ads that get posted.
To my mind, video advertising works best when people are passively consuming content, as they typically do while watching television. So if you are in the mood to watch a TV show online, then you may be willing to watch a few ads – particularly if the content is free as a result. But if, on the other hand, you are actively seeking out content, as you might be if you were searching for a cool new video clip, you may be annoyed by ads inserted into the video playback, especially if those ads do not share the same properties as the content you are seeking.
So maybe Google needs to go one step further in their quest for global media domination. I for one would be willing to watch video ads if I got to see my favorite movies for free. Bring on GoogleWorld!
(30 votes, average: 3.4 out of 5)
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October 17th, 2006 at 1:01 am
YouTubes long tail opportunity
With the use of technology (still to be deployed within the site) Warner bothers will effectively be able to scan and identify all content for copyright material, allowing it either to be removed or collect payment for the work.
Similar technology called “Johnny” (developed in conjunction with the Motion Picture Association of America, Inc. (MPAA)) is already being utilised through the video on demand site Guba.com and is able to time slice audio and video comparing the scans to a vast database to identify video and audio sequences, perfect for tracking down lip synced user videos with copyrighted audio.
If a company like Universal had access to this software it seems they would use it to track down copyright offenders, although just how Universal expects YT expects to extract royalty fees from students who have lip synced to Madonna still needs to be answered. However, flagging the use of copyrighted material could also lead into some alternative options, including some possible revenue generators.
Maybe using a weighted metric for identifying which of there artists are being used, the studios could ask for a % of the advertising revenue, however a more exciting proposition exists which really expands the potential to engage.
By understanding what viewers are in effect watching (or not as the case is with the bastardised versions people upload) the ability to utilize contextual promotions can be explored. The very breadth and volume which is represented on YT makes the site a perfect candidate for the ‘ Long Tail ‘ of selling products.
“The long tail “
YouTube’s model fits perfectly into this low cost of storage delivery service, the Wall Street Journal reported over 6 million videos being online – but here’s the rub, of this it is estimated 90% uses in some form copyrighted material.
Sensing an opportunity , Warner’s partnering with YouTube will offers both an effective awareness and retail opportunities. Pursuing the punter in the street for royalty fees is not.
They ( Warner ) recognise that this medium is one where they can connect with an ever more increasingly difficult buyer. Just like Napster , this medium will not be going away in the near future and rather than fight as Universal seem intent on to claim royalties, they are connecting with a young, dynamic audience.
October 18th, 2006 at 2:41 am
Trevor’s comments here are really interesting, and the whole issue of how Google and/or YouTube generate revenues and manage relationships with the owners of content is a fascinating example of markets in action - a balance will eventually be struck.
There are a number of different angles to the issue of identifying and measuring what people are posting and viewing. For traditional media owners, there is clearly and issue of protecting their copywrite material and having appropriate mechanisms in place for generating revenue from their investments (without which they won’t invest in more content). But, even here there may be some benefits to having some content being posted - trailers for movies for instance, favourite scenes from sit-coms and so on, that effectively work as viral promotion of their properties.
There will then be a whole host of other decisions to make about what to do about the material that get’s posted. For instance – would Universal want to enforce collection of royalties for a young new band they are trying to as they would for an established act? Might they see posts of trailers for movies or favourite scenes from sit-coms and so on as valuable viral promotion of their properties?
Another angle is that of providing currency-type measures for advertisers to gauge the reach of their viral activity (or just the extent to which consumers are posting their ads online). This would cover ‘identifiable’ brand-produced copy (which could be identified using the kind of technology that Trevor describes), but might also extend to consumer-produced ads - identifying the brand content of these (and also some judgement as to whether the comment on the brand is positive or negative will also, surely become a key requirement for brand owners who want to engage seriously with CGM.
As with other media currencies, the needs and interests of the owners of the brands, the content and the media will at some point meet. And market forces should ensure that there’s something in it for the consumer when they do.
October 18th, 2006 at 9:16 am
Thanks for the comments, Trevor and Trevor.
I remember seeing a quote somewhere that stated, “Social media can’t be measured so let’s stop trying.” Trevor A’s news would seem to suggest that this is not going to be true in future. As you both suggest this has some very interesting possibilities for both business and research.