I was surfing around the Web today and didn't have to go far to find a quick column by Matt Asay over on CNET's "Open Road" discussing YouTube and Hulu.
In a piece entitled, "Quality pays: Hulu trumping YouTube," Asay makes the point that because of Hulu's $12 million profit, Google needs to do more with YouTube. Asay believes that Google "needs to show equal care for the [entertainment] industry's IP" and "improve quality."
Generalizations aside, I need to disagree with my colleague on what YouTube should do. Asay claims that YouTube shouldn't become Hulu, but I think that's plain wrong. Hulu is a success today not because it has high-quality programming or respects intellectual property. Hulu is a success today because all the content contained on the site is controlled and demographic data is readily available.
Rest assured that no matter how much money Google is losing on YouTube, it's well worth the cost. No matter what we may think about YouTube and its obvious issues, we can't lose sight of the fact that without all that copyrighted material, YouTube wouldn't be half as popular as it is today and whether Google wants to admit it or not, it needs those clips on there.
It's no longer a question of whether user-generated video is important -- it is -- or if it should be kept on YouTube. User-generated video is how YouTube can bring people to the site and allow it to funnel those people to professional content that Google can monetize. User-generated video isn't the key to making money, it's the professional video that matters most to advertisers.
... Read moreDo 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?
... Read more
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