YouTube has become our national trove of free video, a place where a company can find a free platform for video marketing junk and individuals can watch dogs sleepwalk. But as we've discussed before, the Web's video giant costs Google an unsustainable amount of money each year, regardless of the paltry revenue the site has earned from advertising. So the conversation continues: how does Google make YouTube profitable without killing the service we know and love?
The New York Times Bits blog brings up a new suggestion from a Piper Jaffray analyst: charge a small fee for video uploads that aren't readily monetizable through advertising. While they acknowledge that Google probably won't implement a plan like this, a paying option might not be off the table. Google releases its quarterly results today.
As the Times acknowledges, a nominal fee for ad-less videos would add real punch to the site's bottom line, but would tarnish the brand. But what's been left unsaid by both the Piper Jaffray analyst and the media reaction is whether or not a system like this is technically feasible or equitable to users. As the analyst says:
"YouTube could develop technology based on its current Video Identification technology to protect copyrights to determine whether advertising could be sold against the video to be uploaded. If the algorithm deems Google could not monetize the video through advertising, it could require the user to pay a nominal fee to upload the video to the site, which could be based on the average lifetime cost of streaming for a given video."
Right now, there isn't a lot of pressure on Google's algorithms to get the advertising game right, besides its own revenue. Its system automatically analyzes the content of a video, probably checks tags, title, and description for ad-ready keywords, and decides whether to serve an ad. But when that system becomes the arbiter between a user and his pocketbook, it'll undergo a new level of stress. People will want to know exactly which criteria they're being judged on, because it's costing them money. Accusations of one kind of bias or another will fly.
That's not to mention that whatever system works this way can be gamed; adding certain words, phrases or frames could trick the algorithm into serving an ad and letting the video go up gratis. YouTube would then be stuck with a bunch of ad-interlopers it'd need to weed out at great expense. As users, we'd be stuck with a random frame of a commercial product or incomprehensible descriptions in every video, just because the user was trying to avoid charges.
The final question is billing: currently, few payment systems are set up to handle and process batches of micropayments. Nominal fees are nice and cheap, but if each one is processed separately, it will cost Google a tidy sum in processing fees. They'll either have to develop their own micropayment system—that wouldn't be all that easy—or contract to a potential competitor like Amazon's FPS.
The Times suggests that YouTube's operating costs might not be as high as commonly thought, in which case the whole question is moot. But should Google need to wring more cash from the site, it might create a nest of more complex customer-relations issues. Stay tuned for coverage of Google's earnings results.