March 3rd, 2007

YouTube And The Value Of Video Content Hosting, Distribution, And Discovery

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Google is learning that the value propositions of content hosting, content distribution, and content discovery are not created equal, and that YouTube’s monopoly on all three may be slipping away. A story in the Washington Post states what has been evident for some time:

In the few months since Google paid $1.65 billion to acquire YouTube, both companies have tried to come up with a formula to turn the hugely popular online video site into a moneymaking venture.

Turns out, it’s not easy.

YouTube’s value proposition to average web user is tremendous — we’ll host any video content for free, and you can distribute it anywhere you want through simple embed code. For media companies, the free hosting is nice, but they can afford their own hosting infrastructure. The embed feature is now a commodity — all video platforms will have it if they don’t already, so the mechanism of viral distribution will be universal.

So the only real value YouTube has left to offer is content discovery — more people go to YouTube to find videos than anywhere else, whether through search, channels, community, or because the millions of syndicated YouTube clips drew them back to the mother site. A near monopoly on content discovery, i.e. search, is of course what drove Google’s eye-popping success.

But YouTube won’t have a monopoly on video content discovery forever. It’s only a matter of time before there are dedicated video search destinations that cover the entire web, not just one site (paging Google). Other content discovery platforms, such as social news sites (e.g. Digg), will increasingly be destinations for video content discovery.

YouTube will likely always be a great destination for video content discovery, but it won’t have anything resembling a monopoly, which has made most media companies question whether they need to share any revenue with YouTube.

The argument goes that media companies should want their clips on YouTube as a form of promotion, and so long as YouTube dominates video content discovery, that makes sense. But as the options for video content discovery proliferate, media companies will no longer be beholden to YouTube and the revenue sharing terms it has put on the table.

The other problem for YouTube is that some significant portion of its value to average users has been the ability to upload and find mainstream media content. If users can no longer do so on their own terms, YouTube will lose another big chunk of its value proposition.

What’s great about YouTube for online media observers is that it’s an excellent test case for how the dynamics of content hosting, distribution, and discovery will play out on the web.

  • companies that have the best user profiling systems will be in the best position to offer customized content discovery (i.e. content discovery most in line with what the end user is looking for). youtube, via google's database of info on users, will be well positioned to tap into this aspect of the content discovery biz.

    also IMHO YouTube's real value proposition will be in creating communities and helping niche businesses create communities, that is a big part of where the game will go. as usual google is ahead of almost everyone in this area.

  • "Content discovery" is a good way to describe the only remaining value available from RIAA members as well. I think the fear is that if the advertising money turns out to be less than expected, they (YouTube, RIAA) will shrink to the same power and economics as print publishers. Personally, this feels right to me.

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