The Wall Street Journal recently reported that YouTube isn’t making any money--a startling revelation for most, but how is it possible that the content media giant is not a margin positive business for it’s parent company? And if YouTube, with it’s wonderland of never-ending content, can’t manage profits, what’s the future for everyone else?
The challenge that YouTube and other digital content providers face is the stream of competition that has disrupted business as usual. As well as the reliance on advertising models that aren’t forgiving to bottom lines.
Let’s preface by saying: there is plenty of money coming from the advertising industry as a whole, nearly $170 billion in fact, but it’s also meticulously divided between a plethora of channels (TV, Print, Digital, etc). Digital Video as a mode of content delivery is relatively new (less than 10 yrs) and has to play catchup in some respects regarding monetization.
Although television is losing market share it can still charge a premium for it’s traditional, albeit completely ignorable (and skippable if you own a DVR) commercial spots. For example, Big Bang Theory and other popular network shows can cost upwards of $400,000 for 30 seconds of ad time during an episode. Print, on the other hand, is floundering to find people to invest in a medium with which fewer and fewer people engage.
YouTube is sexy but unfocused. Advertisers want to spend there but it’s still an evolving marketplace--between native advertising, premium sites, Ad networks, DSPs, etc--YouTube and the digital space as a whole are still not exactly sure how they want to do business.
Not to be compared with Netflix which has a subscription based revenue stream that provides original or licenses content, YouTube is in guerilla warfare with the likes of Facebook and Vimeo--social sharing environments that thrive off of individual users providing the content. These sites are all competing for advertising dollars while trying to keep users engaged. Ironically, YouTube’s investment in creating engaged users is one of the reasons they can’t tighten their bottom line. YouTube pays their popular users a lot of money to stick around and continue to produce, while Facebook is happy to let users continue to make, share, and spawn viral videos on their own dime.
So what do YouTube’s shortcomings mean for individual content producers looking to monetize content?
If you’re a filmmaker and can offer something new and fresh, YouTube is still a hotbed of opportunity to develop your brand and make serious money in the process. It won’t be easy, but it’s not a lost cause. Because Youtube is still willing to spend money on it’s top content generators, you’re not at risk until Youtube closes up their bank for good.
If you’re an independent website looking to become the next YouTube or Buzzfeed or popular destination to waste time on, you’re in for a battle. You not only have to provide something unique and original but you’re competing with companies with tons of capital. Advertising dollars are tougher to generate now than ever and generating loyal readership isn’t easy when people have the attention span of fleas and never leave the Facebook ecosystem for news. But if you’ve got a fresh way to monetize (subscriptions walls, user pay to post, better native advertising, etc) anything is possible--even becoming the next big media giant.