Google's 2006 acquisition of YouTube brought an immensely popular site under the search engine giant's umbrella. However, Google has also had issues sufficiently monetizing the site, which reports have suggested requires an enormous annual cash outlay to maintain. The solution? Evidently, to take a few tricks from Hulu.com, a site that has managed to integrate advertising into its streaming-video model.
Google
is actively seeking a way to monetize YouTube, its popular streaming video
site, which reports have pegged at costing the company hundreds of millions of
dollars per year to maintain. An integral part of that process, as mentioned
during Google's April 16 earnings call, is bringing movie and music studios to
the table to integrate their material into YouTube.
"On the YouTube side, we are making very good progress now with small-,
medium- and even large-scale studios," Eric Schmidt, CEO
of Google, said in the call. "The most interesting deal that we just
announced involved Universal Music, which we announced last week, which we are
beyond excited about because it really redefines the business model between
content owners and companies like Google.
"With respect to how it will get monetized, our first priority, as you
pointed out, is on the advertising side," Schmidt continued. "We do expect
over time to see micropayments and other forms of subscription models coming as
well. But our initial focus is on advertising. We will be announcing additional
things in that area literally very, very soon."
Much of what YouTube has recently rolled out, however, seems to have had its
start on Hulu.com, a Website run as a joint venture between NBC and Fox that
streams much of those studios' content, including recent TV shows and
not-so-recent movies. What, exactly, has the new-and-improved YouTube adopted
from its up-and-coming rival?
1. Full-Length TV Shows
The recent agreement between Google and entertainment companies ranging from
Sony to CBS means that YouTube can now offer full-length TV shows. At the
current moment, however, the TV shows on offer seem to primarily be
back-catalog, meaning you can watch the first episode ever of "Charlie's
Angels" but not what Kiefer Sutherland did last week in "24."
2. Full-Length Movies
Hulu used to have something of an advantage in full-length movies, as well,
although its catalog tended to be restricted to older flicks and not new
releases. Now YouTube has jumped into the full-length-movie game with its own
collection; however, its movies on offer also tend to be B-list favorites-think
'90s Stallone flicks and '60s zombie movies.
3. High Definition
One of Hulu's primary marketplace advantages was its high-definition
offerings; unlike other video sites, where you had to squint to make out what
exactly was happening inside a postage stamp-sized window, Hulu allowed you to
watch the shows you'd missed in crystal-clear widescreen format. But with
YouTube promising to add progressively more high-definition content, Hulu's
lead could very well be threatened.
4. In-Stream Ads
In exchange for being able to watch content for free, Hulu devised a system
in which a 30-second to 1-minute ad popped up every so often during a show.
YouTube is implementing a similar system of "in-stream ads." Just
like with ad breaks on regular television, users will most likely use those 30
seconds of interruption to head for the fridge.
5. A Viable Revenue Model
As has been noted by a variety of online pundits, YouTube was becoming a
cash drain for Google. A report published by Credit Suisse predicted that the
site would lose close to half a billion dollars in 2009, thanks to maintenance
costs. At the same time, advertisers have been reluctant to make substantial ad
buys attached to users' homemade content. (Google has dismissed the Credit
Suisse report as inaccurate.)
Hulu, however, was a rapidly growing site precisely because advertisers
could attach their message to a known quantity-i.e., professionally produced
content. With YouTube now doing the same, it has a chance to bring in
additional revenue from previously skittish advertisers.
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