December 11th, 2007

How Google Will Monetize YouTube Without User Generated Content

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Let’s play a game. I’m thinking of a company that identifies talented people who can produce great content that attracts an audience. This company then pays these content producers to publish their content, with the aim of growing a large audience for that content and creating an editorial environment that will be attractive to advertisers.

What company am I thinking of? Time Warner? News Corp? Viacom? New York Times?

No, silly, YouTube.

Last May, YouTube invited a select group of users to begin sharing in revenue from ads that run along with their content. Now, the user-gen site is opening up its “partner program,” giving all users in the U.S. and Canada the chance to compete for tapping the revenue from its overlay system. YouTube will judge its next round of partners according to the amount of pageviews and subscribers they attract. So far, 100 users have been added to the program, up from about 40, though YouTube doesn’t say how many participants are currently involved. Over the next few months, YouTube plans to make partner membership available internationally. (from paidContent)

Never mind the buzzwords like partner, revenue sharing, and of course user-generated content (which is now further revealed as a myth) — if you reframe it, as I did above, you realize that this is actually the traditional media business. Great content attracts an audience that is attractive to advertisers. Content producers are compensated by the media company for their work.

YouTube grew a massive user base by allowing users to post copyrighted content, much of which you couldn’t even buy if you wanted to (e.g. it’s still a treasure trove of rare concert footage), under the cover of “user generated content,” like stupid pet tricks and flatulence flambe.

Now Google needs to monetize YouTube on a massive scale, and nobody’s figured out yet how to do that with other people’s copyrighted material or with low quality content that only amuses small numbers of the content creator’s friends — and that gives advertisers the willies.

So YouTube is trying to leverage its other asset — a platform for up-and-coming talent to distribute their content for free.

This is a smart move — although other sites like Revver have been trying for a while, YouTube has the scale to become a platform for talented video producers to earn a real living. But make no mistake — the content that gets a lot of views, thus earning the producer a place in YouTube’s partner program, gets a lot of views because it’s GOOD. And making good content is HARD.

YouTube has become a place where great content can be found and attract a sizable audience, which is still, despite all the disruption of media, a good business.

But here’s the secret of why YouTube is likely to continue to attract an audience for the “talent-generated content,” even after all (or most) of the copyrighted content has been purged — and why Goolge bought YouTube.

When people come to YouTube to find copyrighted content, how do they find it? That’s right — search. For millions of people, YouTube is the go to place to search for video content. As long as people keep coming to YouTube to search for videos, the monetizable talent-generated content will be able to scale.

So Google may yet succeed in monetizing YouTube in a way that justifies the $1.65 billion price tag — but it will likely have nothing to do with “user generated content” (in the mythical sense).

Comments (5 Responses so far)

  1. I’m not getting your point Scott? Even “clean”, non-copyright infringing video content is still user generated content.

    Are you saying YouTube will have no choice but to find a way to monetize the infringing stuff? How can they?

  2. Jim, no, I’m saying they are going to do it with paid, talented content creators, just like media companies have always done it. But that’s not UGC in the sense it’s typically used.

  3. I think I’m confused still. You’re saying that they’re going to go out and hire paid actors, writers, directors, producers to generate videos?

    Because that’s different than me, with my home cam, making user generated content, and getting paid for it.

    See what I mean? I think I get your overall point, but in reality, there’s a big difference between getting a paycheck to produce video content, and producing video content in your living room in “hopes” of getting a paycheck, no?

  4. [...] Karp looks at YouTube’s effort to monetize their service, and concludes that they are becoming a traditional media business: “Google needs to [...]

  5. [...] How Google Will Monetize YouTube Without User Generated Content [...]

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