YouTube’s head of monetization, Shashi Seth, has now left Google to join a new start-up named Cooliris. He’s been working on YouTube as early as February 2007 but since then, there’s not much success with making money off the video sharing site.
Google bought YouTube for about $1.6 Billion in 2006. The growth of the video sharing service has grown exponentially to become one of the top website destinations worldwide. Never mind the cost of operation such a bandwidth-hungry service as Google hoped it could get its money back thru advertising.
Revver, another competing site, makes money by overlaying ads over the video. YouTube followed this strategy in 2007. Turns out, Revver wasn’t making enough money from the ads. It went down in debt and was sold for less than a million dollars earlier this year.
According to GigaOm sources, YouTube only made a measly $80 million in 2007. That’s just gross revenues and one can only imagine how much operating expenses they’ve incurred hosting all the videos. This number was expected to grow to $125 million this year though other estimates put it just around $90 M.
They say that the slow growth was due to that hulking $1 Billion lawsuit by Viacom a year ago. My guess is totally different. When was the last time a lawsuit ever stopped Google from making money?
My bet is on the fact that the monetization strategy YouTube implements on the videos are way off. Contextual overlay ads? And viewers need to click in order for premium publishers to earn from it? It’s common knowledge that TV viewers hate advertisements. That’s why cable came into business and TiVo is making tons of profits. Why would the same be any different online? When was the last time you clicked on a video overlay ad on YouTube?
I think Google should re-think its monetization strategy with YouTube. How about injecting a video ad before the video loads, similar to what Revver used to do? Wait, the Revver is doing the overlay Google ads now right? Uh-oh.