What next for YouTube?

For every minute that passes in real time, 60 hours of video are uploaded into cyberspace with YouTube. Every hour that is five months worth of video; ten years every day. More video is uploaded to YouTube every month than has been produced by the three biggest global TV networks in the past 60 seconds.

You want more stats? What about 4 BILLION page views per day? Or 800 million unique users per month who watch 3 billion hours of video? But the one stat that we nerds really want to know is still kept a secret.

In an age where data centre (or center depending on which side of the pond you are on) costs are rising all the time, what is the cost of providing us all with such important videos as “Charlie bit my finger” and “Surprised kitten”? And with handheld devises getting quicker, more powerful and above all having better cameras, the amount of video being uploaded will simply continue to multiply month on month, eating up the three P’s of Hosting – power, ping and pipe.

Back in October 2006 Google purchased YouTube for $1.65 billion. Amazingly the company was only 18 months old at the time, with the first video “Me at the Zoo” being uploaded on 23 April 2005. Whilst at the time this seemed like a lot of money for a relatively small company, it has proved a massive success. YouTube has wiped the floor with similar sites. In the US and Europe they completely dominate the video sharing market, with only Vimeo showing signs of resistance. At the time of the acquisition it would have been hard to see how YouTube could have continue to invest significant funding into the data centre requirements to expand its business unless it changed its business model.

Fortunately, they were acquired by the biggest user of processing power in the world. Google’s aim of continuously indexing the web calls for massive data centre capacity and so this was a marriage made in heaven. But at some point surely the cost of space will outweigh the benefit they gain. And at that point what happens to the YouTube model? We have already seen adverts start creeping onto the screen but they are less than effective as a revenue source.

The two issues Google face in trying to make YouTube a viable revenue stream on its own are down to its own competitive market place and how it can index its content. Remember that Google’s mantra is to try and deliver the most relevant search experience to every user and all the time. That is easy to do when you are indexing text on a website. Technology allows computers to easily scan a page and pull out the text and index it. But how do you index a video? The only information a search bot can read is the title, the keywords and the description. So add a video of a tiger playing football and it will not become a worldwide hit unless you are accurate and descriptive. A simple title and description of “Look at this!” will see it consigned to the bargain basement of YouTube clips forever.

The second issue that keeps YouTube awake at night is how to compete. We as consumers live in the instant age. We want certain things, at certain times. YouTube is seen as a diversion, a break in the humdrum of life. That is why the average user only spends 15 minutes on the site per day. Compare this will other visual entertainment, the TV, where the average user spends 3 hours watching programmes per day. That is the problem YouTube have to work on – moving viewers from TV onto their online channel.

Their competitive position is now being eroded by the likes of NetFlix and LoveFilm who can provide On-Demand services, whilst the growth of hardware such as Tivo and Sky + has meant our viewing habits now revolve around our lives and not vice-versa.

Some TV stations such as ITV have started adding content onto a specific YouTube Channel for those customers who do not have the technology to record and watch back programmes, but content is limited. YouTube enforce strict copyright protection meaning it is only these official broadcast partners who are allowed to put content online, which again reduces the appeal.

In a recent article in Time Magazine, Lev Grossman summed up YouTube’s position as being “an inverted looking-glass version of the media landscape; brands that are dominant everywhere else play like amateurs on it, and amateurs play like multinational conglomerates”. This view underlines our viewing habits. YouTube’s structure is simple – we enter at a point of interest, normally following a link of something very specific (“Look at this video of a tiger playing football) and then through the limited indexing and video suggestions we end up 15 minutes later watching a man fall off a trampoline whilst holding a chainsaw (Kids – do not do this at home). That is different from our TV consumption and will always be.

So for now YouTube will remain the home of the 15 minute entertainment break. It has some real business benefits if companies adopt it (How to videos for instance) but it must also look at its business model. Rising technology costs coupled with more and more people adding content can only mean a bigger drain on Google’s resources in the future.

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