YouTube – monetizing web space and facilitating advertising campaigns
Then and Now
Much like the traditional, yet complex broadcasting business model of free-to-air television, YouTube’s expansive collection of video content is also available without any subscription costs to its user-base (Rappa, 2010). By providing a free service to its viewers, YouTube is required to explore other avenues to generate revenue in an effort to profit while offsetting the costs of the infrastructure and administration behind its daily operations. The dynamic nature and ever-evolving environment of the Internet requires web services to continually strive for innovation in order to stay popular and the site of choice amongst web users. As the chart below shows, YouTube has consistently attracted a high proportion of daily users.
Although the terrain YouTube operates on is online, it still requires many of the business functions comprised within a conventional global business. Research and development is necessary to stay competitive and cutting edge, a marketing department to ascertain its viewer’s demographics, coordinate advertising campaigns and drive sales. Operations and I.T. to ensure systems are administered and uptime is maintained and many other additional functions such as business administration, finance and sales.
The selling of ad space is not something new to YouTube, since 2007 it has leveraged sales by implementing clever advertising mechanisms such as overlay ads - a $20 US dollar, per thousand impressions, transparent advertisement which takes up the bottom 20% of a YouTube video and lasts for about 10 seconds, if clicked however it will stop the existing video and display the ad over the top and after it has finished the original video will resume (YouTube Invideo Ads, 2010 & Cashmore, 2007). YouTube expanded on this in 2008 and introduced post-roll ads which are placed on content provided by YouTube official partners. This form of 15 second ad is automatically triggered if a viewer has not chosen to click on the overlay advertisement throughout the video and is just another example of how Google – YouTube’s parent company is attempting to monetize the service (Lardinous, 2008). In addition to the above, banner ads are also being displayed on the homepage in addition to ads placed above related content found to the left of the video, maximising any possible real estate from its webpages which can be sold.
A 2009 initiative to generate income is the introduction of pre-roll advertisements on selected premium video content, similar to Hulu – YouTube’s closest competitor (Buskirk, 2009). In addition to end user content, YouTube also houses superior videos, in some cases from television broadcasts from official partners such as BBC, CSS and CNN and 15 second pre–roll ads are now included within many of these videos (YouTube partnerships 2010). Although viewers believe it to be an unpopular move by Google, YouTube still has to look at new ways of generating income to cover for the expensive running costs of its operations. 2009 alone is said to cost 470 million to cover bandwidth, storage and licensing costs so moving forward, premium video content and advertising through it is now its primary focus (Cashmore, 2009). The direction for the second half of 2010 as reported by the Wall Street Journal indicates that YouTube will allow for pre-roll ads to be skipped and advertises will not be charged for the impression should this occur. The aim of this is to drive innovation by creating compelling ads that will engage their viewers. Having to choice to pick which ads to view from a list will also be another strategy and will be focused on larger videos (Angwin, 2010). The introduction of rich ad content in the form of pre rolled ads is a relatively new move for YouTube, and as a business what it needs to take into account is that its viewers and end-user content submitters who have contributed to its growth over the last few years are conditioned to YouTube being ad free. In order to maintain their member’s retention YouTube will need to tread very carefully with further ventures to monetize YouTube.
Mobile computing has also been touched by advertising and another recent strategy is the inclusion of banner ads on the YouTube mobile device site. Axon suggests a significant rise in mobile computing as more people begin to access the internet from smart phones such as the iPhone and Google Nexus. Due to their popularity, the emphasis of advertisers will begin to transition and start targeting the mobile internet community (Axxo, 2010a).
YouTube and Global Event Advertising
The World Cup has provided brands such as Budweiser and Coke an opportunity to advertise and in both instances, they have created YouTube web presences. Budweiser has launched an online reality television show hosted solely on YouTube which is about 32 soccer enthusiasts from all around the world living together during the duration of the World Cup. Budweiser’s statement is to do everything they can to unite beer drinkers during the tournament (Marshall, 2010). The success of this campaign can be gauged by Facebook’s official campaign page with more than 60,000 likes in 30 hours (Marshall, 2010).
Coke did not go to the same extent but it did however ask Soccer fans to upload a “Celebratory corner flag dance”, a move made famous in 1990 by Cameroon player Roger Milla to YouTube to win tickets to the World Cup along with other promotional prizes (Marshall, 2010).
Source: http://www.youtube.com/watch?v=vezxonSuenI
(YouTube, 2010a)
Both these examples highlight that YouTube is still considered a powerful and popular web platform by advertisers looking to launch advertising campaigns - leveraging from other global events will continue to be a focus of YouTube in order to further monetize itself.
