YouTube’s stagnation

“We lose a little on every sale,” said the fabled used-car salesman, “but we make it up in volume.” That seems, as well, to be YouTube’s strategy at the moment.

The Google subsidiary has yet to figure out how to make money on the Twinkie-sized videos it sends over the net, but its international expansion is apparently going gangbusters. At least, that’s pretty much all that Steve Chen wanted to talk about in his appearance at the NewTeeVee conference this week, according to Chris Albrecht: “Despite the significant hurdles YouTube has yet to overcome – including a billion-dollar lawsuit, a new copyright protection system, and the question of how to monetize its massive amount of content – co-founder Steve Chen’s focus was on the international market. During his talk, he kept reiterating YouTube’s global plans.”

Chris Nuttal, of the Financial Times, says that Chen’s refusal to discuss the big challenges his company faces merely amplified the “palpable atmosphere of dissatisfaction with YouTube” that prevailed at the event. “The lack of monetization on YouTube today is astounding,” groused one venture capitalist. Mary Hodder, of Dabble, noted that YouTube’s market dominance seems to be eroding as the online video market fragments: “She cited how six months ago she surveyed videos being referenced by Digg members and found nine out of 10 were sourced from YouTube. Now only one out of 10 were from Google’s $1.65bn acquisition.”

Nuttal also reports that an audience member heckled Chen over the lousy quality of YouTube videos, shouting “HD! HD!” during his talk. Another onlooker quipped, “Someone scream out ‘Better Content!’” To add insult to injury, Nuttal compares Chen’s haircut to the infamous “quiff” worn by the North Korean strongman Kim Jong-il.

When it comes to the bottom line, Google appears to be flailing at the online video business. It’s already abandoned its attempt, through Google Video, to charge for content, and its YouTube ad strategy seems to be going nowhere slowly. The big question that has hung over YouTube since its inception has yet to be answered: “In a two minute video, where the hell do you stick the commercials?” Maybe there is no good answer. Maybe NewTeeVee is just a rerun of OldTeeVee, except even dumber and a whole lot less profitable.

May I interest you in a 78 Pinto?

10 thoughts on “YouTube’s stagnation

  1. alan

    It might seem obvious that it’s all about monetization and massive expansion but is it?

    The barrier between a generation who are in it for the ride and those who are focused on the inevitable exit strategy whilst bandying billion dollar price tags appears to be not only invisible but non existent to the Twinkie, Wonder Bread set.

    The angst about youtube’s generation’s destination and monetizing the journey comes from a generation that made the junk food what it is today, coveted.

    Chen’s focus say’s it all “building a platform and localization.”

    A two minute poor quality video is the new generations virtual Twinkie! The question is how are the resulting issues going to look like down the road? A contorted mind, bloated souls, generational bypasses in second life.

    Opportunities to bridge and learn more from varying cultural norms is being squandered by greed.


  2. Norm Potter

    I think YouTube is a loss leader for Google, because they want to establish and maintain it as a Web standard platform.

    I know Apple has recently nudged Google (Eric Schmidt is on Apple’s board) to boost the quality of its feeds to H.264 encoding, which is MP4 and just so happens to be the iPod video standard. And this standard is good enough for digital videos on your big screen TV.

    Note too the latest iPhone has a YouTube button.

    I think Google has decided that the advantage in having YouTube without ad support (for the moment) rests in service and customer satisfaction. Google is providing a major service to the public and especially to bloggers and content providers who can link to a YouTube video rather than serving it themselves. Video EATS bandwidth.

    I am VP of an educational content company. I can say that Google saves us a lot of money we would otherwise have to pay to our Web service provider.

  3. mndoci

    I wonder what the impact of native support for h.264 in Flash is going to have?

    As someone who has dabbled in some online video content, I tend to use something other than YouTube as my distribution mechanism, but when it comes to generating traffic, YouTube is still streets ahead of everything else I’ve tried

  4. Charles

    I was astonished at the YouTube announcement that they were going to improve video quality by a new mechanism to detect users’ bandwidth and deliver a higher quality stream to higher bandwidth users. This technology has been available for years and years, it’s called QuickTime Streaming Server and is available as Free Software. I use it on my own weblog.

    I have noticed that the YouTube service available on the iPhone has superior quality over videos delivered via the usual Flash/Web interface. iPhone videos are encoded in H.264 at two bitrates, a low bitrate for when you’re using EDGE, and a higher bitrate for when you’ve got WiFi. But older videos that predate this arrangement aren’t available, it appears that only new videos are being encoded in H.264.

  5. bfeeney

    The future of video is exemplified by the combination of podcasting and the BBC’s new iPlayer service (alongside similar services offered by Channel 4, ITV and most recently NBC). Effectively it means transitioning from a push model, where radio and TV programs are broadcast at certain times only, to pull models where people subscribe to the radio programs (“podcasts”) and TV shows they like, download them, and listen / watch them when it’s convenient.

    Podcasting has already seen major growth, and the proliferation of video machines, TIVOs etc. shows people desperately want more control over their TV as well. I currently listen to my radio via podcasts as and when it suits me (indeed, I listen to more talk-radio now than before I got into podcasting). Similarly, subscription, when-you-want it TV is also likely to see significant growth once someone fixes the last yard problem of getting content from PC to TV. People are already working in this area, with PC-TV sets, X-Boxes and the Apple TV. So far none is satisfactory, but Apple is arguably best placed to tap this market with iTunes and some form of AppleTV 2.0. It’s simply a matter of waiting for bandwidth, compression, and QoS regimes to catch up.

    Of course there’s no mention of YouTube here, and with good reason, there’s nothing special about YouTube. It uses the Flash video from Adobe with a lot of bandwidth from it’s VC partners and Google and that’s it. Anyone can, and indeed has, replicated it. Some, like Veoh, have rolled out high-quality feeds. YouTube effectively has no intangible assets – brand, techology and patents – which is the only sort of asset that matters in an IT company. Machines and office space aren’t worth a damn (certainly not $1.65bn).

  6. Jake

    I smell another Skype-like writedown a’comin! Will Hurley and the other dude be as honest as Zenstrom about Google overpaying?

  7. MarcFarley

    I publish short video interviews on my company’s blog. I’ve switched from using Youtube to another video service because the overall quality of Youtube (video quality, upload experience, management of videos) was not competitive. I’m not sure I would use any video service if it forced an ad into my viewer’s experience. I would find a way to publish the content myself. The locality (URL) of the hosting site is not very important to me because I don’t expect people to find my stuff through search engines, but through links from our corporate site or the blog.

    My guess is that most business customers – who might be the target for monetization schemes – feel the same way.

  8. Simon

    I’m beginning to think that apart from Adsense, Google really don’t have any other firm ideas for making money with anything else that they’re doing, which is astounding.

    Admittedly, I’m far from an expert on these matters but I keep on looking for some grand strategy that’s under the radar of everyone, but all I can see is a load of ‘I hope this works, somehow’ projects that appear to be underwritten by the insane profits that ad-sense gives.

    I wonder how long before people really start to doubt if Google is anything other than a one-hit wonder? I mean it’s an amazing hit, but to survive in the long term surely they need something more?

  9. Kendall Brookfeld

    There must be a video ad scheme that would be mostly innocuous. It just requires a light touch, which unfortunately the ad guys congenitally lack.

Comments are closed.