Google Admits It Still Hasn't Figured Out How To Make Money From YouTube

from the keep-trying dept

Tue, Jun 17th 2008 1:26am — Mike Masnick

When Google shelled out $1.65 billion for YouTube two years ago, you had to figure that the company had some plans on how to make money with the site. Apparently not. Google is admitting that it's still not quite sure how to make money with the property, though folks seem sure there must be some way. Still, from this discussion it appears that the massively hyped video overlay ads haven't really lived up to expectations.

To be honest, it still seems like the wrong thing to do to figure out how to stick ads on YouTube -- because no such ad is going to get very much attention. People come to YouTube to watch the videos they want to watch, not to be annoyed by an irrelevant ad. Instead, the real focus should be on the fact that YouTube videos themselves are advertising -- the question is just: for what?

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: advertising, business models, online video
Companies: google, youtube

32 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Crosbie Fitch (profile), 17 Jun 2008 @ 3:22am

The Artist
The videos advertise the artists who produced them.

What Google can sell is the artist's production of art to their audience.

Blindingly obvious. Consequently, everyone's blind to it.
[ link to this | view in chronology ]
- Ric, 19 Jun 2008 @ 10:54am
  
  Re: The Artist
  No, that wouldn't work. It's FREE. So, the artist can do it themselves and GOOGLE doesn't have to be the middle man. The Artists can just say, "go to our website" then display link and Google is left out of the loop.
  
  Sorry, not as easy.
  [ link to this | view in chronology ]
Jake, 17 Jun 2008 @ 3:43am

Why not borrow a tactic from their search engine and charge a small fee for 'sponsored' videos to appear at the top of the search page?
[ link to this | view in chronology ]
- Anonymous Coward, 17 Jun 2008 @ 4:52am
  
  Re:
  That actually might be a really good idea. I think it's pretty clear how everyone else can make money off of YouTube (make a cool video that people want to watch that happens to showcase your product). If Google give you a way to 'push' your new ad more, that could be useful. And I don't think it would 'break' YouTube, either, as most people will still seek out the videos they want to find and the really viral hits will still take off on their own.
  [ link to this | view in chronology ]
  - Ric, 19 Jun 2008 @ 10:56am
    
    Re: Re:
    That wouldn't work.
    
    You can already "google" the key words and it'll take you the to video. Google already did that extra step of "promoting" the video, if you have the key words and people are looking for it on Google.
    
    Sorry, but the 'push' thing will not work.
    [ link to this | view in chronology ]
Twinrova, 17 Jun 2008 @ 3:58am

I guess Google hasn't figured out...
Content and ads are the same thing.

Help 'em out, Mike.
;)
[ link to this | view in chronology ]
Iron Chef, 17 Jun 2008 @ 4:49am

A possible idea...
Well, Cisco believes internet traffic will continue to grow, attributing much of the growth to Video.

A possibility for YouTube would be premium content alongside free content-- Consider if Viacom got out of the way and started selling TV shows on there, it could present a new revenue streams. After all, Google has "Google Payments" just kinda idling there.
[ link to this | view in chronology ]
- Ric, 19 Jun 2008 @ 10:58am
  
  Re: A possible idea...
  Yeah, Google has already done this.
  
  Google already sell shows and episodes on Google Video. No use doing this to YouTube. If they did, it would defeat the purpose of YouTube and another website will crawl forth and be the next YouTube.
  
  Sorry, but selling shows is already done by Google Video and is a bad idea to incorporate it into YouTube as well.
  [ link to this | view in chronology ]
Elizaday, 17 Jun 2008 @ 5:51am

How about charging after a video has had a certain number of hits? Once a video gets x number of hits, google and the creator split the revenue based on some smart algorithm?
[ link to this | view in chronology ]
You guys dont get it, 17 Jun 2008 @ 6:18am

The solution is not to charge for content. If Google charged for any video, then no one would pay for it. Youtube is free. If they started charging people, then people would find a new source to get free videos. Google knows this, which is why they haven't done it.

People love youtube, but there are only a select few who love it so much they would pay to go to the site.
[ link to this | view in chronology ]
- Ric, 19 Jun 2008 @ 11:00am
  
  Re:
  YOU ARE CORRECT SIR/MA'AM. I agree and think the same way as you.
  
  "People love youtube, but there are only a select few who love it so much they would pay to go to the site."
  
  Why pay for something that is free?
  
  Youtube was the answer to this.
  [ link to this | view in chronology ]
NPGMBR, 17 Jun 2008 @ 6:28am

I Don't Get It
The thing I don't get about Google and YouTube is that much of the content created for YouTube is generated by the same people Google wants to direct ads at. Essentially, Google wants to pair an ad on your content and get money from it, while at the same time not sharing those funds with the content creators or am I lost on this?
[ link to this | view in chronology ]
Eliot, 17 Jun 2008 @ 7:04am

Premium Quality Videos...
What about the content producer paying a premium fee to provide people with a better quality video? This might be of interest to advirtisers who want to provide a better viral ad video in which people can actually see what they should be seeing.
[ link to this | view in chronology ]
- Anonymous Coward, 17 Jun 2008 @ 7:54am
  
  Re: Premium Quality Videos...
  This is another really good idea. It offers more value without breaking the key to YouTube's success: free, unfettered access to video media for both production (well, distribution) and consumption.
  [ link to this | view in chronology ]
Drew, 17 Jun 2008 @ 7:18am

Google and youtube
How about the RIAA/MPAA model wait for someone to upload copywritten content and then sue them?
[ link to this | view in chronology ]
Chris, 17 Jun 2008 @ 7:28am

Pay for premium
I know that most pay for premium models dont work, as the point of the video or song gets across regardless of the quality of the videostream. But if there was some standard by which google judged an artist as a premium artist and then offered them benefits for joining a group that is only allowed to paying members then everybody could win. and you could purchase subscriptions to the quality groups you wanted, and google could offer paying customers previews of similar content. Thus a troupe like derrick comedy who has 50 videos 10 of which are popular could join this pay network, and then people who want to watch their new content would be forced to subscribe, while at the same time people who do subscribe could be enticed to subscribe to other content in a similar vein like barats and baretta or any of the other numerous groups which has been able to produce a stream of new content.

Also by learning how to rank artists/groups popularity and will help the learning in how to judge which metrics people are willing to pay for and will help promote other groups who have gotten the same type of attention.

This also creates a community of artists who share similar works and qualities who could then collaborate over this new communication medium we have called the internets or something like that.

This method would also leave lots of free content available from the premium artists as their old videos should remain free. It would also encourage innovation as new people are trying to get to a point where their videos are popular enough to reach this premium point where they can start charging for their new videos.

This would also enable google to provide help to premium artists either with software or hardware that could aid in the making or editing of videos. Or even some consulting for scripts of some of the most popular groups.

This could also provide talented people a springboard into hollywood ... but thats just getting bigger than the point of this post.
[ link to this | view in chronology ]
- Anonymous Coward, 17 Jun 2008 @ 7:59am
  
  Re: Pay for premium
  "and then people who want to watch their new content would be forced to subscribe"
  
  You just broke YouTube. The point is that it's free to consume. When you start putting up barriers preventing people from accessing your content, you lose. Nevermind the technical headache you wouldf have trying to keep the content walled in, or the negative PR you'd get when a popular group suddenly "makes it" and now requires a subscription to view. You'll piss off your viewers, and eventually you'll piss off the content creators.
  [ link to this | view in chronology ]
Hulser, 17 Jun 2008 @ 8:06am

All ads are annoying
To be honest, it still seems like the wrong thing to do to figure out how to stick ads on YouTube -- because no such ad is going to get very much attention. People come to YouTube to watch the videos they want to watch, not to be annoyed by an irrelevant ad.

I watch TV to see TV shows and movies, not to be annoyed by commercials. I visit web sites to read the content, not to be annoyed by banner or pop-up ads. But there they are. People do any number of things, including just walking down the street, where they are annoyed by unwanted ads.

Most people don't actively seek out ads; the ads are just where the people are. Saying that ads won't work on YouTube because they'd be annoying ignores that fact that almost all ads are annoying, no matter what the medium. Companies pay for advertising in spite of the fact that most people find it annoying.
[ link to this | view in chronology ]
- Anonymous Coward, 17 Jun 2008 @ 9:17am
  
  Re: All ads are annoying
  I actively seek out the "I'm a Mac (and I'm a PC)" ads. They're clever and entertaining in and of themselves. Everyone acts that because ads ARE annoying that they always MUST be. That's not the case.
  [ link to this | view in chronology ]
  - Hulser, 17 Jun 2008 @ 10:04am
    
    Re: Re: All ads are annoying
    I actively seek out the "I'm a Mac (and I'm a PC)" ads. They're clever and entertaining in and of themselves. Everyone acts that because ads ARE annoying that they always MUST be. That's not the case.
    
    Well, as TD has pointed out before, in a world where you can skip television commercials so easilly, you have to make the commercials so that people want to watch them. So, yes, there are some exceptions to the rule, like the I'm a Mac ads.
    
    But the point is that ads work in spite of the fact that almost all of them are annoying, if for no other reason that they are interupting what you want to be doing. So, it's a reasonable theory that because YouTube users haven't had to suffer the annoyance of ads, that you'd essentially break the site and push people somewhere else. But I don't think it's valid to say that an ad won't get any attention because it's annoying. If this were the case, there'd be no such thing as a TV commercial or a web pop-up ad.
    [ link to this | view in chronology ]
Formerly anonymous coward, 17 Jun 2008 @ 8:17am

OR
What about pay accounts that can add and view text on the videos (like Nico Nico Douga http://nicovideo.jp/) Free for all as is, added value (fun) for pay. Just brain droppings.
[ link to this | view in chronology ]
- Ric, 19 Jun 2008 @ 11:10am
  
  Re: OR
  Sure, I get what you mean.
  
  Premiums must be something that the general public are willing to pay for. If it is just for MORE funny, then the public will catch on to the humor and think that what is free, is good enough already.
  
  Instead of pay or premium, think about contributions/donations. People are more willing to donate money, then to pay for something. Even if it is just a single dollar, they will pay. It's either $1 USD or nothing. And when you have 1,000,000 visitors a day, $1 USD donation sounds pretty cool.
  [ link to this | view in chronology ]
Anonymous Coward, 17 Jun 2008 @ 8:42am

Here's a question. Why do they need to make money on it? Google isn't hurting for cash, that's for sure. Isn't it sometimes good to just provide a great service that works well and benefits everyone, without trying to squeeze every last penny out of the people using it? I know, business people are all about the money. But I think this is something that has gone far beyond just another web service to sell. This is a massive online community, and trying to implement any major changes to how it functions (especially if dollar signs start appearing), I think they're going to face a lot of opposition. They may end up hurting their business more than if they just left it alone. But that's just my uneducated opinion, so make of it what you will.
[ link to this | view in chronology ]
- Anonymous Coward, 17 Jun 2008 @ 9:21am
  
  Re:
  They shouldn't *change* how YouTube works, because like you said that'll break it, and no one will use a broken YouTube. But that doesn't mean they can't monetize it's popularity. Two suggestions above were pretty good: let providers pay for "recommended" or "sponsored" placing on the site (front page, searches, whatever), and/or let providers pay for higher-quality video. Neither CHANGES how YouTube works, they just add in more value for the providers and consumers. It's pretty obvious that a content provider can get value out of putting content on YouTube; if Google can give them options to better-leverage that vlaue (for a price), then Google can make money of YouTube without limiting or changing the service or dynamics we all currently enjoy.
  [ link to this | view in chronology ]
DavidM (profile), 17 Jun 2008 @ 10:18am

It's not that hard
I don't understand why Google/YouTube can't figure this one out.

1: Insert advertising prior to every two or three videos (or each one) a user watches. This makes the advertisement impossible to skip or ignore. Google keeps the advertisement fees.

2: Provide users an incentive to skip inserted advertising by allowing users to pay for "Advertisement Free" YouTube content. Google then shares the fees with advertisers.
[ link to this | view in chronology ]
- aMoLk, 2 Nov 2009 @ 4:49pm
  
  Re: It's not that hard
  Its not that easy.
  
  You know pandora has a 5 song skip limit on free accounts. And guess what, when I reach my limit, I close the window and go to another free site to listen to songs. Apply the same logic here. They're only gonna lose us, if they annoy us with ads.
  
  You has smart ways of showing me similar videos that might interest. May be they can sue some of that "wisdom" in showing ads that might interest me.
  [ link to this | view in chronology ]
Abdul, 17 Jun 2008 @ 12:09pm

Why not do it the Hulu way???
I think this is an apt example of the dilemma facing even enterprises to meonetize social media. With their popularity amout to huge traffic, it's really ridiculous to learn that even popular social media outlet like YouTube is struggling to make money. But how do Hulu make so much money yet with lesser traffic compare to YouTube? I think they should review the present business model of YouTube and if possible do some alteration to its status. Google is not alone in this social media dilemma: How To Monetize Social Media?No One Knows (http://www.internetevolution.com/author.asp?section_id=466&doc_id=155826&F_src=flftwo)
[ link to this | view in chronology ]
oneofmany, 18 Jun 2008 @ 10:46am

the new .com bubble?
remember the dot com bubble back in the day? Everyone was sure that there is some way to make money but hardly anyone knew how. Well the web 2.0 hype is really close to repeating history. Adding adding video adds would simply make users switch to another service and there is hardly anything that google can do to make youtube work. They forgot that the only reason the google business model works is that google is the defacto standard for a search engine. Youtube has never been that. Yes it was the most popular video sharing site and still is but it has absolutely no technological superiority and as a matter of fact there are niche sites that provide much better content than youtube ever could. Almost all the content on youtube is amature production or illegal and you can't make money from stuff like that.
[ link to this | view in chronology ]
mdmadph (profile), 18 Jun 2008 @ 1:25pm

For what?
Instead, the real focus should be on the fact that YouTube videos themselves are advertising -- the question is just: for what?

For what? For ISP's. It's really quite basic.

Videos on Youtube advertise just how fun it is to be on the Internet, and you have to pay somebody to be on the Internet, don't you? Be it your cable provider, your cellphone provider, your local coffee shop for their WiFi -- all the same.

I don't understand why people haven't figured it out yet -- the best way to make money off of the Internet is to sell access to the Internet.

Now, just get rid of that pesky government-controlled monopoly thing, and you've got yourself a business.
[ link to this | view in chronology ]
- Ric, 19 Jun 2008 @ 11:03am
  
  Re: For what?
  I agree.
  
  We think on the same level here.
  
  Selling something that is FREE is well, dumb, because everyone knows about how FREE it is, no one would pay for it or buy it.
  
  Service. Medium. Two simple words... Millions if not, Billions of dollars.
  [ link to this | view in chronology ]
shaquille moten, 9 Jun 2010 @ 12:23am

youtube
man wtf is wrong wit them they should of left them alone dam google always got to ruin some shit i cant make a god dam youtube account with out make google account fist what kind of shit is that
[ link to this | view in chronology ]
shaquille moten, 9 Jun 2010 @ 12:23am

youtube
man wtf is wrong wit them they should of left them alone dam google always got to ruin some shit i cant make a god dam youtube account with out make google account fist what kind of shit is that
[ link to this | view in chronology ]