NewTeeVee recently carried a post titled Report: User-Gen to Only Ever Account for 4% of Video Revenue that relied on a recent study from the Diffusion Group. This upcoming study claims that user-generated video accounts for around 42% of all video streams online but only 4% of the revenues, while professional video accounts for 58% of the streams and a whopping 96%t of revenue.
This should come as no surprise to people following the trends in online video.
The Wall Street Journal printed an article on July 9 that declared Google Push to Sell Ads On YouTube Hits Snags, which was also followed by an AP article titled YouTube’s Ad Revenue Short of Expectations. While YouTube is held up as a great example of web venture success, it was originally built around content that advertisers don’t want to advertise against.
I quote from the WSJ article:
“One complaint from mainstream advertisers is that YouTube — where clips uploaded by users range from raunchy to heartwarming — lacks enough content alongside which they want to run their ads.”
Online video entrepreneurs take note, without advertisers, you are limited to a subscription model – pay for play. If you want to drink from the holy advertising grail, you have to give the advertisers what they want, plain and simple.
A number of potential investors have asked why we don’t consider allowing users to upload their own videos and follow the YouTube model to build an audience. These people clearly have very little understanding of the online video advertising world.
Now I can point them to the WSJ article instead of trying to educate them since they failed to do their own research before suggesting a business strategy (Do we actually want investors like that is a whole other story).
I don’t doubt that Google will eventually figure out how to monetize the content effectively, but even they are finally going to test pre-roll and post-roll video advertising, something they were against.
Never forget that Google did not invent pay-per-click advertising for search, they adopted it from GoTo.com (which became Overture and then was acquired by Yahoo! – oh the irony).
Google adapted ppc to their specifications – focusing on relevance, not just the highest bidder.
Google issued a statement in a 1998 paper they published about Google technology saying that ad-funded search engines are “inherently biased to the advertisers…the better the search engine is, the fewer advertisements will be needed for the consumer to find what they want.”
Look where they are today thanks to an ad-funded search engine. They could very well find a mousetrap for ugc video advertising and create a better one.
Until then, it is much smarter for entrepreneurs with limited funds to focus on the money.