10 years of YouTube and still no dollar signs

 

I adore Youtube, it’s a safe home for free speech, education and live cat streams. The team of worker bees at YouTube have enabled anyone with a video camera to have their creations discovered on merit alone, and new young stars to have a viable career.

2016 marks 10 years since Google acquired YouTube and it seems fitting the traditional gift for a decade of dedication is tin, because Google haven’t chalked up much more than that in revenue.

After 10 years, YouTube is still not profitable. That’s crazy.

When YouTube stars first emerged it was incredibly exciting to think anyone off the street could make money and possibly even a career from the ‘broadcast yourself’ mantra. For a while it seemed like the dream, but now YouTube stars are being lured to other platforms that invest in their talent and provide better advertising formats or sponsorship deals.

Creators are jumping ship because YouTube doesn’t enable enough worldwide fill. A video star may get a 1,000,000 views from Egypt, but they won’t make any money. Their audience is either geographical, or coincidental and nothing is gained from the view. There’s no impetus to scale and the CPMs advertisers pay, is too low.

When creators do hit that sweet spot and make money from their videos, Youtube takes a heavy cut - 45/55 split to be precise. That’s a hefty sum to handover.

The 7 deadly YouTube sins

We’ve established it’s crazy that YouTube isn’t profitable, buy why? We’ve narrowed it down to these 7 deadly sins.

No premium content

It’s not like they haven’t tried to be a central hub for premium content - they just haven’t tried hard enough.  For a while Channel 4 had all its content on Youtube, but they removed it because they could earn a lot more on their own 4oD service. The login wall on 4oD gives them valuable 1st party data which YouTube won’t, and they can leverage their existing sales team to sell direct without YouTube taking a cut. This is where Google’s walled garden approach really started, it’s not a fair model for any creator and many won’t tolerate it anymore.

Awkward for Advertisers

YouTube shut off access to other DSPs like Tubemogul last year. For creators Youtube is incredibly easy and open, for advertisers it’s really awkward. Buying a specific video, using your own targeting data, and your own viewability & verification vendors is just not going to happen. This is a historical problem.

When Google first brought Youtube they had a hard time getting their sales people to actually push it. They were used to the easy money machine that was search and display. It wasn’t until they made it 20% of the sales team’s bonus that they actually got many sales at all.

Premium short form video was driven away

A few years ago when it was hard to sell your own video ad space, mid-sized publishers used to upload all their videos such as gadget reviews on Youtube, and then let YouTube take care of monetization. But as video SSPs like SpotX & StickyAds made the process of selling your own inventory easy, they’ve all gone back to using other hosting platforms like Brightcove or Ooyala. And YouTube just watched them go.

No cut of sponsorship or product placement

Whilst the revenue split isn’t an ideal model, YouTube do a fantastic job of nurturing creators by providing free studio time. But a massive opportunity has been squandered. What wasn’t grasped was the potential to connect brands to creators, instead they’ve just let them go to another MCN (multi-channel network such as Maker Studios or Fullscreen).

Lack of brand safety

Love or loathe them, everyone knows how much vitriol YouTube comments contain. Automatically filtering content is incredibly tough, especially with so many cultures and languages, so without the ability to whitelist, the risks to brand reputation are still there. Whilst recent changes have been made to remove monetization from videos that aren’t ‘advertiser friendly’ - it’s far from perfect.

Not a destination - If YouTube’s ‘home page’’ was a holiday destination, we’d be asking for travel compensation. As an average user, your entry point to Youtube.com is via a link someone else has shared. The only reason to go there is to see the recommended videos and most people just watch embeds in other sites. It’s not pretty, it’s not particularly well thought out, it’s a bumpy ride. But, Facebook looked at the numbers of people clicking out to Youtube and decided they wanted in, hence launching Facebook video serendipitously with no content protection systems. This enabled people to simply upload stolen clips from Youtube and get massive views, all inside Facebook’s wall.

Lack of ad format innovation

The big one for me. YouTube engineers have created the best pre-roll format ever made. TrueView is loved by advertisers, and tolerated by users. It’s led to innovative creative that engages a user within 5 seconds. YouTube do small tests all the time with things like brand recall surveys, and implement minor changes. But rarely do they ever see full production.

There is a palpable lack of creative innovation, in fact after 10 years, this is their full ad format selection - this is their selection...

Can they turn it around?

Youtube Red

YouTube are pushing their subscription service hard and with a lack of ad revenue it’s easy to see why. However, they’ve landed themselves on a double edged sword. If the subscription model is too successful, it will naturally cannibalize the ad business -disproportionately so, because those who can afford a subscription are generally those which advertisers will pay more to reach.

Live streaming

Herein we reach the zeitgeist. Facebook et al are throwing tons of money at Live Stream content. Youtube isn’t a destination site that an average user spends tons of time loitering on, like Facebook so the use case is different. YouTube views are rather more like appointments, rather than a serendipitous opportunity in your news feed. Still, neither Youtube nor Facebook have a viable way to monetize Live Stream, interrupting the stream for a 30 second ad is not the solution. The time to make the bold innovation in ad formats to suit evolving watching habits is now.

Youtube may currently be the king of short form, but if they don’t start shifting the goalposts, it won’t take another 10 years before a blue logo’d upstart takes over. Whether it’s building a better destination for users, innovating more creative ad formats to reward channel owners or forging partnerships with those using YouTube content, something has got to give or the 20 year anniversary will be mark nothing but another penniless decade.

 

Can’t believe it’s been 10 years of YouTube? Neither can we but luckily Coull’s own Scott Mackay is never too far away to remind us what user content looked like back in 2006. And while this video is still fun 10 years later, Scott is yet to receive his millions - will future Scott be any better off?