Why is YouTube not able to monetize its dominant position?

At TechCrunch an excellent question: why isn’t Google monetizing it’s dominant position in online video?

If you look at YouTube’s numbers, one thing is clear: It completely dominates online video. YouTube accounts for 37 percent of all videos watched on the Internet and attracts about half of the audience, according to comScore. (And if you add in Google Video, that brings the total to 38 percent of videos watched). The No. 2 player, Fox Interactive Media (i.e., MySpace), accounts for only 4.2 percent of videos watched.

Yet when it comes to turning that market dominance into dollars, YouTube is holding back. Forbes estimates that YouTube will make $200 million in revenues this year, and $350 million next year.

But if you believe eMarketer’s estimate that online video advertising will reach $1.35 billion this year, that would mean that YouTube’s share of video advertising dollars will only be 15 percent (less than half of its share of videos watched).

I think there are 3 main reasons that YouTube’s share of video ad spend does not reflect its dominant position:

1. first of all most of the videos on YouTube are absolutely crap and no advertiser wants to be associated with crap
2. secondly, their CPM on video advertising is probably quite low.
3. And thirdly, YouTube’s fill rate is low as you can check for yourself, actually I watched 20 videos and not one video-ad (but plenty of search ads and banners/buttons)

Then what is Google betting on with YouTube? They haven’t paid 1.6 billion just for market-dominance in online video, there must be some trick up their sleeve we haven’t seen or figured out yet…

Content Creation meets Attention Allocation

I have nothing to add to this excellent post by Scott Karp. Some quotes:

But media has always been — and always will be — about scale, and there is only one trend in media now that matters — the only trend that has ever mattered — consolidation to achieve scale. What’s changed is not that scale has stopped driving the media business — what’s changed is HOW you achieve scale.

and:

This is where consolidation converges, where content creation meets attention allocation — new media companies are realizing that they have to do both.

to read more go to Scott’s blog

Why magazine publishers just don’t get it*

 Rafat Ali writes on paidcontent.org about magazines going online. He makes an excellent point as he concludes:

At the end of the day, magazines are about communities of interest, whether professional or lifestyle driven. If magazines keep that driving mantra in mind, and use the Web for all its is worth, things could begin to look brighter and bigger on the monetary side soon.

Most magazine publishers understand the fact that their readers are a community of interest.  Then why do online initiatives of most magazine publishers not take off as they should? I think because many magazine publishers still do not understand that online publishing is something completely different than offline publishing. They are separate businesses with their own dynamics in content and advertising and they should be organized as such. Maybe the biggest obstacle for magazine publishers is that their business is still doing too well, and they are not hurt by online business enough. That’s a shame, because it is not about the end of magazines, it is about the opportunities online.

*with the exception of course of the company I work for

Should we vertically integrate in online advertising?

While Google and Yahoo are trying to be media companies and advertising agency in one, traditional players in the media sector have to respect their legacy/background. At least that is what Publicis Groupe is planning to do as they want to play a significant role in the “all-digital advertising future” as can be read in a New York Times profile of Publicis . Not by vertical integration but by sticking to their profession of being an ad agency. How does that work for traditional media companies getting involved in digital media? Should they stick to what they are best at: producing and aggregating media or should they develop their own ad networks? And if they do try to integrate media and advertising in the way that Google and Yahoo are doing: how trustworthy will they be? Questions that popped up as I read Scott Karp’s post on the topic today:

“Pull up a bowl of popcorn — the transformation of media and advertising is only getting more interesting.”

p.s. off-shore digital ad production seems to be good business to get into, if more ad agencies will follow Publicis’ steps

Is there money deep in the Long Tail of content?

When I recently commented on a post on NewTeevee I got to think about making money deep into the long tail of content. As pointed out by Jacques Bughin of McKinsey Brussels in a recent discussion I had with him, the Long Tail was written on the evidence of online retailers. And even though the “content long tail” really does exist, the question about monetization is still open. One thing is for sure as I learned today, the audience is there.

“Every day 95 percent of the YouTube library is watched at least once” according to Google TV technology officer Vincent Dureau in EEtimes.

My argument is that if there’s an audience, there eventually will be an advertiser. Not based on the pageview advertising model but rather based on behavorial targeting advertising, as is done by Tacoda. Or based on Google’s Click-per-Action (CPA) model combined with behavorial targeting. Or it might be based on a totally new model which still has to be invented. Nobody knows…

But eventually deep in the long tail of content online, money will be made by someone. Next question is: by whom…?

Topical ad networks

Excellent article today by Jeremy Liew (thanks Yme for the link) about behavorial targeting. He argues that as the long tail of sites grows longer, the need for ad networks gets higher. And most importantly he concludes that the more targeted the ad network is, the better it might be positioned now and in the future. He calls the targeted or topical ad network “synthetic channels”.

Here’s a big chance for traditional media to get a piece of the action: through its existing channels in several media (print, TV, radio, events) it is able to jump-start synthetic channels. There’s only one warning: traditional media companies should realize that they have to open up the network to channels of their competitors as well and not only stick to their own, proprietary channels and media.

Cannot be done? Hachette Filipacchi did it in the US by buying automotive synthetic channel called…Jumpstart. Nomen est omen.

Who will guide us in the Infinite Choice of User Generated Content?

Will it be Google again? 

Today I read an interesting report by Bear Stearns on User Generated Video. Three of their main findings:

Magazine Publishing is Content Aggregation

The future of media will be determined by how well legacy media companies survive the unbundling of their business models, how much better legacy companies like News Corp who have acquired a platform (MySpace) can restructure their business, and the degree to which the new native platform media companies like Google can position themselves to dominate the new media landscape.

According to Scott Karp, legacy media companies need to deal with the unbundling of their business model. But what is this business model in case of a magazine publisher?