When Pope takes his 2,000-year old religious message on a dedicated YouTube channel and BJP leader LK Advani uses it to seek votes from country?s youth, you know YouTube is a hot property. Today, it hosts more than double the number of videos hosted by its nine closest competitors put together. Latest ComScore numbers show 100 million unique viewers. If catalogued as a search engine, YouTube would rank number two, ahead of Yahoo.
The real story
The impressive array of numbers, however, is not enough to provide the world?s largest video site with a business model. Set up in 2005 by colleagues Chad Hurley and Steve Chan in a garage exactly four years back and sold for $1.65 billion to Google one year later, YouTube is still struggling to make money. In contrast, advertisers are throwing money at other web video sites and current estimates peg online video advertising market among the brightest.
Though Google does not give out YouTube revenues, recent estimates peg them at $200 million worldwide this year and $ 350 million next year. This can?t be enough to excite Google CEO, Eric Schmidt.
Consider Hulu, backed by NBC Universal and News Corp. With 210 million videos hosted in December, it might not be anywhere close to YouTube?s 5.6 billion videos. Hulu still boasts of more than 100 advertisers and claims to have sold out its ad inventory. It?s not tough to understand why. Its content appeals to advertisers and isn?t plagued by copyright concerns. They don?t need to worry about questionable user-generated content. Advertisers want to place ads on videos that they know their target audience is watching.
The biggest problem is that it can?t monetise majority of its videos as it has claimed to be an internet services provider to save itself from any liability under copyright law.
Neverthless, YouTube has tried out a string of monetisation efforts. It is now reported to begin allowing content creators to sell their own ads, with the Google-owned video property taking a cut. The YouTube Partner Programme, which gives top producers on the site a slice of ad revenue, has now opened to all. YouTube is also trying to create a ?click to buy? service that takes advantage of the ordering mechanisms in iTunes and Amazon.
As it turns four, it needs to get ready for another threat. Professionally produced content sites are beginning to join hands with social networking sites, thus offering features similar to YouTube communities. As sites with professional content are struggling to find unique selling propositions, they are banking on communities that reign supreme on web today. And as they build new communities, sites with media-backed content could steal marketshare.
YouTube could be facing its biggest threat in its fifth year of existence. It needs to figure out how to turn its traffic machine into a cash machine, while guarding its community network. A lot rides on the answer.