If it can't find a solution, Google should kill YouTube
Do you remember the good ol' days of YouTube? Back when a private company owned it and you could post and view whatever you wanted up there and no one would say a word because, well, it was practically bankrupt and copyright owners knew they wouldn't get anything out of a lawsuit? Those were the days, weren't they?
Now, after a $1.65 billion buyout by Google, YouTube is not only a veritable junkyard for all the crap we didn't watch a couple years ago, but a bloated mess that costs too much to operate, has a huge lawyer target on it, and barely incurs revenue.
And to make matters worse, Eric Schmidt, the CEO of Google, has no idea what to do about it.
Speaking to The New Yorker, Schmidt said that it "seemed obvious" that Google should be able to generate "significant amounts of money" from YouTube, but so far, it has no idea what to do.
"The goal for YouTube is to build a tremendous community....In the case of YouTube we might be wrong," he said. "We have enough leverage that we have the leverage of time. We can invest for scale and not have to make money right now, he said. Hopefully our system and judgment is good enough if something is not going to pay out, we can change it."
But is changing it really the best idea? Since Google acquired YouTube, the company has tried desperately to make something, anything, from its $1.65 billion investment, but so far, it has failed miserably. Of course, it thinks that 'pre- and post-roll' advertisements may work, but the company isn't too sure.
And therein lies the rub. If Google is unsure of how it can turn a profit on YouTube and it still has no idea if it will be able to get a return on its investment, why shouldn't it cut its losses and do something drastically different?
Now I know that you're probably thinking that I've lost it and my editor overlords will finally put me out to pasture, but think about it for a minute: why should a company that overpaid for a service continue to dump significant amounts of cash into it (not to mention spend millions on copyright lawsuits) if it has no chance of creating a valuable revenue stream?
Obviously Schmidt is doing all he can to allay shareholder fears over the YouTube debacle, but the very fact that he said anything about it is telling. And to make matters worse, Google's ad revenue on YouTube is so low, it's not even material to the financial statements. In other words, if Google is making anything with YouTube, it doesn't even matter.
Let's face it -- the YouTube acquisition was a major blunder and regardless of how successful the company is in other areas, there's no reason to suggest advertisers are willing and ready to place ads on videos of 18-year olds shooting milk out their nose or 80-year old men mooning a parade.
As far as I can tell, much of the online advertising money is going to sites like Hulu where the content is controlled, the shows are regulated, and the demographics of the audience are easily obtained.
How does YouTube and its content compare? The audience is huge, but it's filled with a diverse set of people who generally view a select few of the more popular videos; the videos are barely regulated; and the content isn't controlled in the least. Why should any advertiser want to send cash to a service like that?
Now I understand that Google wants to be a major part of the boom in online video advertising and I can't blame the company for it. But doesn't it understand the average company that's trying to make people want a given product? It's as if Google believes that sheer popularity is the only factor that advertisers use before they start throwing cash around.
But what about perception or target audience? Did Google forget about hitting the right market segment or putting ads in the right place at the right time?
Now, I should note that this doesn't mean that YouTube won't find itself advertisers. Certainly there are companies that would be more than happy to spend money on YouTube, but what kind exactly? Will YouTube become the dump of advertising where strip clubs and brothels will advertise on sexually-oriented videos and unknown politicians will sell themselves on left- or right-leaning clips? I certainly don't see Johnson and Johnson sending ad dollars to YouTube anytime soon.
Lost amid the shuffle, though, is the question of ad dollars itself. How does Google monetize YouTube on videos that you create? Sure, it figured out the online business, but video is a totally different game entirely and without creative control over the content, ads may be found on videos that could leave a bad taste in Google's mouth and yours.
Beyond that, YouTube costs Google millions each month and I'm just not sure how long the company really wants to maintain that loss until it follows a new course.
Killing YouTube would obviously be the last resort and I think there are a few options Google has before it's forced to pull the plug. But if it can't find a way to regulate some of the content that will host ads and it doesn't attract high-paying advertisers, it's sitting on a billion dollar mistake that keeps draining cash from its coffers with each passing day.
YouTube was the greatest blunder Goolge has ever committed and it better act quickly if it wants to turn it around. But if it can't right the ship over the next few years and advertisers start spending more cash elsewhere, YouTube will be nothing but a repository for people to upload crappy videos that have no commercial viability. And for Google, that's unacceptable.
Google is trying to run a business that is responsible to shareholders. And while it may have the cash to keep one of the world's most popular sites running now, popularity of a website, in and of itself, should not justify its operation. If the company is losing millions each quarter, I simply don't see why it should keep it up.
It may sound ludicrous to shut down such a popular site, but we're entering a new generation of entertainment in the online space and pageviews don't always mean success any longer. Especially if a company is spending millions just trying to keep a website alive.
I would love to see YouTube survive, but business is business, and if Google can't turn things around, I simply don't see any other option for Schmidt and company.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
That's probably not the case as MS did just recentlly buy that stupid flight search find (which should have been a natural progression from another failed MS purchase, expedia), probably just dumb luck.
It is about money, plain and simple. The original community that once existed is so small that it would be wise for them to find a safe haven soon.
There are a few people in the Executive Offices of Google that refuse the one proposal that would put them on the road to making money. Pull the plug on the "private" setting and nearly 50% of the content would disappear. Doing so would make the advertisers very happy :)
Don, you have put down a number of great points in your article. The shareholders are listening and will force the Executive members to make a choice. Why would anybody put their money into a product, that is draining resources and dollars, from other great products from Google?
Members of CNET remember what happened to the original mp3.com. Google is now facing the exact same choice. YouTube as it is, cannot and will not ever make money for the shareholders.
Sorry kids, it does cost shareholders money for you to let your cat play a piano for 10 seconds. Shareholders are those people who put their own money into Google and most are currently not amused.
What they need to do is to ink deals with the big television companies, take themselves out of the television companies sights by paying them a small amount for their shows, and put some advertising on the site...... maybe a 'pre-viewing' ad.
If Google wish to make money out of the website they should make a YouTube premium offer, that allows you to do more, for example they could make it possible to download the videos that users would have the option to make downloadable. (Yes, I know there are already programs like RealPlayer that can download them but hopefully the honest people would pay for this right).
why does that dumb phrase appear in EVERY article i've read by this guy
The answer is simple yet I won't get any credit for it so why bother?
OK fine. In order for them to make the money they need to realize what You Tube is. It's a talent pool and their job is to weed out all the junk and buy up the rights to anything they deem worthy for higher production.
a 24hour American Idol.
Maybe do just that. You Tube presents American's Next 15seconds of Fame or something along these lines.
People are too greedy is the problem. Why spend money when you have billions and don't really need anymore?
"OK fine. In order for them to make the money they need to realize what You Tube is. It's a talent pool and their job is to weed out all the junk and buy up the rights to anything they deem worthy for higher production."
That would make YouTube's quality higher, as people put things up with an eye to bigger and better things. Google, are you paying attention?
www.xanga.com/CarynW
Reverse the question. What net segments does Google need to be in to be viable as a company as a whole? It may very well be that there are a couple of niche's that don't have a lot of income potential that need to exist to fuel the rest of the company. If YouTube fits that role, then it needs to stay. The question though becomes how to make it feed the rest of the company efficiently.
Google shouldn't fall into the same "must have giant profits on every product" trap that Intel has. Intel earns most of its profits on x86 microprocessors, especially those selling for more than $100, so it is very quick to kill products that sell for only $5-10, because they don't like the business model. Those cheap chips can still be profitable, but it takes work. You-tube may not be as profitable as google.com, but I don't see a lot of other free google services making any money, either.
I can think of one thing right off the bat. There are many videos that are copies of public events or personal input. These would have no copywrite or could be set up to have no copywrite.
I would pay .99 $ to be able to down load the video in mp4 format. Google are you listening??? Just like iTunes. or you can see if you can revenue share with a copywrited video, say 50-50. ???
Just leave them alone for a while. I am sure they will work it out just fine. :-)
en
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by danielszabo1981
June 16, 2008 3:30 PM PDT
- You know, I usually find most of Ron's pieces shallow and not really "informed". BUT, in this case, I think he finally hit close to what I like to call "the mark". When it comes to the bottom line, wall-street is unforgiving and (at best), merciless.
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Showing 1 of 2 pages (45 Comments)Anyone that wants more than "18 year olds shooting milk out their noses" is usually hard-pressed to find anything of value on YouTube. Moreover, when you finally do find the batch of clips that contain the subject material you're looking for, you have to sort through a ton of crap videos before you can find anything useful (or, if the request calls for it, entertaining). It is a highly unorganized site, and I think Ron nailed the basic premise of YouTube -- Community. History taught us through Orkut (Google's failed attempt at Social Networking) that "Community" alone is not enough to generate revenue. Drilling deeper into the concept of "Community", lets talk realistically for a moment, and I'd like to pose this question for silent reflection -- How the hell could google profit from idiots that pose retarded videos? How could they profit from the people that watch those videos? Do you suppose that that target demo has anything to offer in the way of financial contribution? The answer is a resounding no. Every time. Show me someone that is rich enough to spend lucid drug money on passive online purchases via text ads, who is also dumb enough to enjoy watching the milk-shooters, and I'll show you a president who isn't in Iraq for oil.