Never bite the hand that feeds unless…

It was a news story that went under the radar in many parts of the word, but on Monday it was reported that a 55 second YouTube video had been sold $760,999. Whilst the video is an opportunist, amateur production, the amount it has been sold for is almost Hollywood value. I am sure many of us will have seen the video in question, simply known as Charlie bit my finger but perhaps we may not in the future, depending on the motivations of the new owner.

The sale came after the video was listed on the website with the simple explanation of “Bid to own the soon-to-be-deleted YouTube phenomenon, Charlie Bit My Finger, leaving you as the sole owner of this lovable piece of internet history”. The auction ran for just over 24 hours, with the opening bid being $99,999, with 11 active bidders then driving the price up to $760,999, the winning bid by “3fmusic”. The video is still available to watch on YouTube, with the message “Waiting on NFT decision”. What happens next is a mystery.

The video was posted 14 years ago and has since racked up nearly 885 million views – it is a huge investment in a relatively new way of owning digital media. Whilst there could be opportunities to monetise it in some way to get a return on investment through advertising on digital platforms such as YouTube, it would take some time to recover that on a video, which whilst is a piece of Internet history, is over 14 years old. Of course, this could be a shrewd investment, based on the fact there is only one authentic copy of the video which could appreciate in value over time.

On the other hand there is almost certainly copies/downloads of the video elsewhere on the Internet or on peoples digital devices. There are numerous programmes that allow users to download YouTube videos – NFT prices/values are driven in part by scarcity of the digital media, so whilst there will be one owner of the original, others will be able to still watch the same video on other platforms. That is a form of digital piracy but it becomes incredibly hard to constantly monitor the internet for websites that may be hosting the file.

The market of and for NFTs continues to evolve. There have been some interesting developments within the music industry of artists looking to release their material as NFTs, with digital archives of who owns the music being recorded within a specific blockchain, but this particular purchase could be a compelling event for the sale of digital media. Content creators could potentially sell their work as single, authenticated items rather than syndicate content.

Now, where did I put those videos I sent to You’ve Been Framed twenty years ago?

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.