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Three former PayPal employees saw an opening in the market for such a website and together they created YouTube in February 2005. The official YouTube beta public site was launched in May of 2005 and attracted an average of 30,000 viewers per day. The surge of more user friendly video and Internet technology combined with an increased interest in social networking, allowed the amateur a unique opportunity to create and share videos. YouTube quickly grew to be the world¶s largest community video platform for original content creators and advertisers on the Internet. In November 2006, YouTube was bought by Google for $1.65 billion. Today the site continues to provide viewers with a wide variety of user-generated video content, music clips (video clips), films, TV, and video made by the users themselves such as video blogging and short original videos. Most of the content on YouTube has been uploaded by individuals, although media corporations including CBS, MGM and other organizations have begun offering their material on the site, as part of the YouTube partnership program. (Ibarra, 2009.) The industry for online video viewing is huge with over 160 million people watching online videos in 2009. In just one month in August 2009, YouTube streamed 10 billion videos (Laudon & Traver, 2010, p. 425). In addition, online videos that were normally viewed only on PC¶s has expanded to mobile devices and is further increasing YouTube's audience. However, since YouTube provides bandwidth and hosting for a good portion of the world¶s videos, the uploading of an estimated 15 hours of videos each minutes, represents costs for YouTube and very little revenue (Learmonth, 2009, p.2). Additionally, videos have the highest click-through rate next to search engine marketing and e-mail campaigns (Laudon & Traver, 2010, p. 425). In
spanning all geographies. YouTube must determine whether it can expand to high quality video in addition to amateur and if the two mediums can co-exist. in 2009.000 views but. could increase the retention rate and provide a larger platform for advertisers. Gender of viewers. mobile video use shows the largest segment as 13-17 year-olds and 25-34 year-olds (Nielsen Company Report). 2009. Major Fortune 500 companies.2008. Fifty-one percent of YouTube users go to YouTube weekly or more and 52% of 18-34 year-olds share videos (YouTube Fact Sheet). The user base for YouTube has a broad range from 18-55 and is evenly distributed by gender. however. The second challenge is to figure out how to position the advertisement so as to not disrupt the viewing experience. providing a broader spectrum for potential advertising partners.000 views. such as Dove. 1). illustrated in Table 2. STOP There are three challenges for YouTube. The first challenge lies in the ability to link the right advertisements with the appropriate video content. shows a higher percent of female online video viewers. have learned that people get more excited and are more likely to pay attention to video content then look at a banner or direct advertisement. a featured video was worth about 105. Lastly. Customer Demographics In Table 1. essential in acquiring high-end advertisers.2% decrease (Learmonth. a 48. a larger percent of males view videos through mobile devices (Nielsen Company Report). with the largest segment being 25-65 year-olds. the Nielsen Company Report on Online Video Use (2008) illustrates a wide distribution by age. p. Expanding the customer base from amateur to higher quality videos. however. this dropped to 54. Table 1 .
It is the social aspect to YouTube that reflects its social networking characteristics. Understanding the motivation of YouTube customers is critical in determining the likelihood of altering the current viewing experience to include higher quality videos.Table 2 YouTube participants create and view videos for information seeking. Viewers can share opinions on video content and can share the content itself by e-mailing links to friends and family. . and for entertainment. social interaction.
Just three . If YouTube is to succeed in becoming ³the largest advertising platform in history´ (Laudon & Guercio. YouTube has begun doing exactly this. The social component was reflected in two specific motives: social interaction and co-viewing. At other times. 704) they must add features that attract new viewers and keep the old viewers coming back more often. generating a consistent stream of revenue and expanding the customer viewer base. YouTube must find a way to keep viewers on their site longer. YouTube user motivation was measured with 427 college students with a 45-item Internet-motives scale. they share videos or information about the videos by posting comments and rating the videos online (Haridakis and Hanson. The findings from the study suggest that people do use sites such as YouTube to enhance their social circles and social lives. YouTube viewers do not visit the site frequently and when they do. p. At still other times. YouTube will need to allow the amateur video creator and viewer an avenue for social interaction as this is the strategy that has made YouTube successful. In fact. To generate more advertising revenue. they do not stay for long. users view videos for leisure or entertainment. A co-viewing motive refers to an interest in watching. they view videos they choose in demand with others. To retain their current customer base. Nevertheless. and the average stay is only about five minutes. expanding YouTube¶s strategy to include strategic partnerships with high-end film producers could provide an avenue to lure big-name companies to advertise. Currently. discussing and sharing videos an individual likes with family and friends. Users appear to occupy several roles. One way to do this is to enable streaming of fulllength films and television programs. YouTube is clearly a social medium. 2009.Haridakis and Hanson (2009) applied a Uses and Gratification approach to examine the motives of YouTube users¶ viewing and sharing of videos. Only 2% of monthly viewers view daily. 2009). At times.
99 to $5. YouTube must also substantially increase the amount of rentals available on their site. 2010). it is difficult to even find where to go on the site to access these rentals.99 per rental. YouTube announced plans to offer five films from the Sundance Film Festival (YouTube blog. In contrast. an additional page must be added where viewers can easily go from the home page to the rental library. Since this experiment. viewers may become irritated when they click on a link and find it is a pay-for service. YouTube can maximize their viewership and ultimately generate more advertising revenue. Currently. there are less than 100 movies for rent on YouTube. Currently. After reviewing the homepage closely. a person can find the option to a rent a movie in the YouTube Store. YouTube must develop partnerships with some much bigger players. NetFlix has hundreds of movies available for instant download. The partnership with Sundance Film Festival provided a nice entry into the rental market. If rentals are to become a core part of the YouTube offering. YouTube has added a small collection of other movies available for rent at a cost of $. Keeping rentals separate from the YouTube staple of amateur videos is important and will ensure that current viewers are not alienated from the site.000 in revenue (Helft. Strategic Partnerships . If YouTube attempts to integrate rentals within their free video library. but to compete with the likes of NetFlix. The films were available for 10 days and netted the company just over $10. Viewers will quickly become disillusioned by the thought of paying for something that once was free and may flee to competing sites. YouTube must do a better job of advertising their available rentals if they hope to generate any substantial revenue from movie rentals.months ago. 2010). By keeping a clear separation between their free library and their rental library.
but only 3.4% of video streams. . such as movies and television shows from established media firms like MGM and CBS is where the real money is. Stream Count Usage and Ad Revenues. A 2008 report by a web analytics group showed that user-generated content accounted for 42. long-form premium content (such as premium movies) accounted for only 2. Figure 1.2% of streams but accounted for 41. with advertisers happy to pay for their ads to appear alongside professionally-made videos.6% of ad revenues. On the other hand. This figure illustrates that more usergenerated content is available but professional content generates higher adverting revenues.7% of ad revenues. This content.User-generated content is what gave birth to YouTube but in order to maintain its dominance YouTube must continue to forge partnerships with professional content providers to increase the proportion of premium content on the site. as can be seen in Figure 1.
they predicted that this would only rise to about $17 in 2013 (Gannes. CPMs for professionally-made short-clips were around $30 and expected to rise to over $34 in 2013. 2008. . which were only bringing in rates of around $15 in 2008.The report also looked at CPMs (clicks-per-impression) and found that CPM's for professionally-made long-form content were $40 in 2008 and expected to reach $46 in 2013. They compared this to user-generated videos.) Figure 2 shows the huge difference in CPM's based on content type and demonstrates why professionally-made premium video content should be a main strategy for YouTube.
) This figure illustrates that professional content generates higher adverting revenues than user-generated content. and many other networks and studios (Technology Review. Following their purchase of YouTube in 2006.Figure 2.com. Google began to follow in Hulu's footsteps by partnering with several media groups in efforts to monetize the video-sharing website. however. They exclusively offer professionally produced content that attracts greater ad revenues. In 2006 and 2007. YouTube was further able to understand the value of professional content when another online video provider. Hulu does not offer usergenerated content. started gaining popularity. Hulu distributes video both on its own website. all four major record labels signed deals with Google to include their . 2008. Online Video Advertising Growth in CPM (clicks-per-impression. ABC. syndicates its hosting to other sites.) Similar to YouTube. and allows users to embed Hulu clips on their websites. Hulu. Fox. Hulu has grown quickly with this model and has been profitable for several years. Unlike YouTube. Hulu is a website offering commercial-supported streaming video of TV shows and movies from NBC.
they found that consumers who were exposed to the ad were much more likely to visit the film¶s web site. Warner Bros. The trailer was a big hit with viewers.music videos on YouTube. Google and the record companies share in the revenue generated from in-stream advertising. 2009. YouTube also signed content deals with several major short. Turner.. Univision. Then. Internet users watch the music videos for free. To promote the film. In addition. a day before the film arrived in theaters. YouTube began offering major livestreamed events in 2009 such as concerts by U2 and Alicia Keys and the Rose Bowl (Eun. 2009 was a pivotal year for YouTube's partnership strategy. An example of the success of YouTube's new partnerships with premium content providers is what happened when the movie "Where the Wild Things Are" was released in the fall of 2009. . The premium and professional content on these channels all carry in-stream advertising. As can be seen in Figure 3. the UK's C4 and Channel 5. Through a partnership with CBS and MGM. search for it on YouTube and look it up via search engines. YouTube began offering classic full-length TV episodes and full-length movies. Warner Brothers released the movie trailer onto YouTube several months prior to the film's release. A web analytics service later looked at the traffic data to find out how well the YouTube ad placement worked. it was viewed by millions.and long-form providers including Disney.) YouTube also released a newly designed site in April of 2009 that segregates user-generated content from professional content making two distinct channels of content. the studio bought prominent placement on YouTube¶s homepage.
Ad placements can be based on items related to the video such as a subject category or an interest area of the viewer based on his or her viewing history. As YouTube expands its strategic ad partnerships.76 billion in stock that Google paid for the site more than three years ago. an estimated 55 percent increase from 2009. Analysts expect YouTube to generate about $700 million in revenue in 2010. The strategy to increase premium content for YouTube appears to be paying off for Google. they must be cognizant of the issues related to ad placement. it likely will turn profitable." This figure illustrates how viewers of a YouTube advertisement for the movie "Where the Wild Things Are" were much more likely to take further actions to find out more about the movie. YouTube Ad Results . helping to validating the $1. YouTube currently places ads using matching technology. If YouTube meets this target. Video creators can determine which videos they want to be monetized but . Customers and advertisers complain that the ads don¶t always fit the video."Where the Wild Things Are.Figure 3 Figure 3.
long-form premium content accounts for 41. This will increase the likelihood of large name companies purchasing advertising space.most creators opt for all their video uploads to be matched with ads. generating higher revenue for YouTube. Recommendations 1) Although YouTube was founded based upon user-generated content. a revision to the home page is necessary. this source provides only 3. This should be a primary strategy for YouTube since it will increase the ability to offer more ads per view and thus more advertisers would be motivated to sign on. By adding clear tabs to separate amateur video libraries from rental libraries. If rentals are to become a core YouTube offering.6% of ad revenues. Since erroneous linking of ads that don¶t always fit the videos. Additionally. YouTube can maximize their viewership and ultimately generate more advertising revenue. 2) Correct linkage of advertisements with video content will encourage high-end advertisers to partner with YouTube. YouTube should continue to expand the base of premium content from established media firms such as MGM and CBS. whereas. YouTube needs to continue to develop matching technology. 3) Streamlining the search process for customers would enhance the customer experience. YouTube must continue to develop enhanced matching technology.7% of ad revenues. Conclusion . since CPMs for premium content is expected to reach $46 in 2013.
S.com/2009/12/YouTube-partnerships-10-memorable. July 10). P.com/2008/07/10/report-user-gen-to-only-ever-accountfor-4-of-video-revenue/ Haridakis. http://youtube-global.com Nielsen Three Screen Report (2008). & Guercio Traver. Retrieved on May 4. December). YouTube¶s take from movie rentals: $10.aspx YouTube Blog.. C. D. Sixth Edition. Society. 317-335. The New York Times online.blogspot. Ibarra. Helft. M. Why free-ride YouTube is finally winning ad dollars.fuor. but there¶s a long way to go. February 2). Retrieved from http://ytbizblog. 2010 from. Technology.nytimes. E-commerce: Business. 2010 from. (2010. YouTube's 10 memorable moments of 2009. 4. Retrieved on May 4. .com/2010/02/02/youtubes-take-from-movie-rentals-1070916.shoeniii. Fuor Digital. (2009). 2010 from http://www.References Eun. Retrieved on May 4. Laudon. 2009). K. C. G. Retrieved from http://newteevee. pp. (2010. 28(10). (2008.html.html Gannes. M. Advertising Age.16.com/2010/01/youtube-to-sundance-independent. 2010 from lexisnexis. Social interaction and co-viewing with YouTube: Blending mass communication reception and social interaction. Prentice Hall.blogspot.com. Google Teams With CBS. http://bits. (April. (2009. & Hanson. (2009). (2009). Report: user gen to only ever account for 4% of video revenue. 53 (2).net/dnn/online+video. Learmonth. Retrieved on May 4. January 20). Journal of Broadcasting & Electronic Media. MGM on YouTube. Television Week.709.blogs. Retrieved from Business Source Complete database. L. Google sells ads against 9% of site¶s streams.
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