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June 04, 2008

YouTube: Why is it hard to monetize videos?

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.

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5 Responses to “YouTube: Why is it hard to monetize videos?”

  1. jhay says:

    Perhaps it would turn to paid or premium services? I can only imagine how much YouTube takes away from Google’s coffers just to keep it running.

    Then again, what would happen if YouTube would suffer the same fate as Revver did? OMG

  2. Jeffrey says:

    Putting an ad before every video would be good, but it may disappoint viewers. Probably make it 10 seconds or less in length.

    Or put a clickable watermark ad on the screen.

  3. Jim says:

    I think even photo sharing site hardly earn some money (though I might be wrong with flickr). Ringo is closing down at the end of the month. The only reason that it cited, though not directly, was the withdrawal of its partner in hosting video for its site, which it introduced just late last year. After all the effort in re-designing its site and ‘requesting’ members to click sponsors’ site, it apparently is not earning that much.

  4. Alexis says:

    Hi,
    Video sharing is all the rage those days. We all want to share our videos, to share our passions and the things we like. There are so many sites around to publish our videos on the web that it is sometimes hard to make a choice. We know some of them like YouTube, Revver or Dailymotion, but there are so many others competing to be the number one, or targeting a specific audience, whether geographically (China, Japan, Turkey…), by language (German, Arabic, French…) or for the kind of content they enable to publish (cooking, planes, extreme sports…).
    I have compiled a growing list of nearly 700 video sharing sites, video search engines, and video download sites that you can check at http://www.ilikesharingvideos.com
    For each of them, you will get useful information such as their history, the country from which most of their visitors come, their niche, their rank, their latest news…
    This site offers some other interesting features, like a forum about online videos, how to make money with your videos, how to create your own YouTube site, etc.
    So if you are interested in video sharing or online video marketing, give an eye to this site, it worths it.
    Cheers

  5. How about injecting a video ad before the video loads, similar to what Revver used to do?
    -Hell no. That would be so annoying1

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