Saturday, September 02, 2006
YouTube Channels: Advertising 2.0?
My thoughts about YouTube over the last year have been quite schizophrenic. I've tried to look at their business and found it easy to fall into the "YouTube is a flash-in-the-pan" group of sceptics. I have to say, in the last few months I have come to better understand the phenomenon that is YouTube and how they apply to Advertising 2.0.
Its clear that YouTube is a Web 2.0 company as the user is empowered and every new user on the system makes the system better. But from a value proposition, stripped down to the most basic element, what is YouTube's Value: Video Distribution.
Who uses this service? By 'user' I mean person whom places video online not someone who viewers it. A YouTube user is someone that is an early adaptor of video editing and yet has no outlet to place their video online. This is where I underestimated YouTube because I did not 'see' this population as very large. So, I'll start my analysis here.
The lynch pin to YouTube (and copycats) is the ability of their users to generate 'finished' video content. Finished video means video editing, which means software ownership and knowledge, computer processor and hard drive power, and time. These requirements are most likely the reason why most of the original video content is produced by younger users (say under 21).
To make a product plug: I lead the production of an on-demand video encoding application, www.isatvideo.com and www.Eye2EyeVideoPostcards.com, which were designed to eliminate the need for video editing. I thought the market maker would be easing the post-production process, not distribution. We target the early majority population and the majority of our clients are coincidentally over 25.
Getting back to YouTube, their business proposition is not defendable as proven by all the YouTube copycats. This also means that their user loyalty can be weak. So, their dilemma, until this summer, was how to make money. Clearly, moving to a subscription service, like www.isatvideo.com, was not going to work. Some sort of advertising was the answer, but what kind? Google AdSense or banners may provide some revenue, but User Generated Content sites demand the lowest values.
What I think YouTube has begun to develop is an Advertising 2.0 solution. One that, like Web 2.0, becomes more valuable as more advertisers participate. One that does not require the user to leave the site, but embraces the core values of video distribution. A solution that does not distract or interrupt the user experience, but rather invites users to participate.
The current solution: Channels!
I say current, because I'm sure additional Advertising 2.0 solutions will develop in the future. Anyway, Channels.
Channels are sponsored (revenue) and yet provide value to the user base in terms of content. The more sponsored channels the better. Music, Movies and Products. Along with companion channels for User Generated Content. And best of all, from a long term business standpoint, channels are defendable - only those with market share can compete.
Channels also make YouTube's core value proposition of video distribution more defendable. Buying Channels on YouTube becomes less expensive and provide more value to many of the likely deep-pocketed competitors that may be exploring developing their own copy-cat. In this way, Channels may transform likely competitors to paying clients.
Its clear that YouTube is a Web 2.0 company as the user is empowered and every new user on the system makes the system better. But from a value proposition, stripped down to the most basic element, what is YouTube's Value: Video Distribution.
Who uses this service? By 'user' I mean person whom places video online not someone who viewers it. A YouTube user is someone that is an early adaptor of video editing and yet has no outlet to place their video online. This is where I underestimated YouTube because I did not 'see' this population as very large. So, I'll start my analysis here.
The lynch pin to YouTube (and copycats) is the ability of their users to generate 'finished' video content. Finished video means video editing, which means software ownership and knowledge, computer processor and hard drive power, and time. These requirements are most likely the reason why most of the original video content is produced by younger users (say under 21).
To make a product plug: I lead the production of an on-demand video encoding application, www.isatvideo.com and www.Eye2EyeVideoPostcards.com, which were designed to eliminate the need for video editing. I thought the market maker would be easing the post-production process, not distribution. We target the early majority population and the majority of our clients are coincidentally over 25.
Getting back to YouTube, their business proposition is not defendable as proven by all the YouTube copycats. This also means that their user loyalty can be weak. So, their dilemma, until this summer, was how to make money. Clearly, moving to a subscription service, like www.isatvideo.com, was not going to work. Some sort of advertising was the answer, but what kind? Google AdSense or banners may provide some revenue, but User Generated Content sites demand the lowest values.
What I think YouTube has begun to develop is an Advertising 2.0 solution. One that, like Web 2.0, becomes more valuable as more advertisers participate. One that does not require the user to leave the site, but embraces the core values of video distribution. A solution that does not distract or interrupt the user experience, but rather invites users to participate.
The current solution: Channels!
I say current, because I'm sure additional Advertising 2.0 solutions will develop in the future. Anyway, Channels.
Channels are sponsored (revenue) and yet provide value to the user base in terms of content. The more sponsored channels the better. Music, Movies and Products. Along with companion channels for User Generated Content. And best of all, from a long term business standpoint, channels are defendable - only those with market share can compete.
Channels also make YouTube's core value proposition of video distribution more defendable. Buying Channels on YouTube becomes less expensive and provide more value to many of the likely deep-pocketed competitors that may be exploring developing their own copy-cat. In this way, Channels may transform likely competitors to paying clients.
