Entrepreneurs and small businesses sometimes struggle with YouTube and online-video marketing. So I teamed with ReelSEO to write a guide called “Online Video 101: Small Business.” It’s free, and you won’t get a pesky sales call if you register and download it.

Sorry the blog’s gone a bit grey lately, but I’ve been busy posting a video each day (every time you poop). Caught the virus from Trippy at his wedding. See ‘em in this playlist called “Holiday Blitz.”

According to a recent comScore report (May 2011, released June 17, 2011), Hulu was the last-place site in the top ten for unique viewers, it had the highest number of ad impressions of any site included in the survey. Tremor Media Video Network ranked second overall (and highest among video ad networks) with 700.8 million ad views, followed by Adap.tv (642 million) and BrightRoll Video Network (565 million).

So Google (YouTube) maintains its leadership with 176 million viewers engaged in 5.6 billion viewer sessions (about 16 hours per viewer in the month). Vevo is now the #2 video-sharing site, even before Yahoo and Facebook (as well as media companies like Viacom, Turner and NBC). But advertisers are choosing the ad networks like Tremor, Adap.tv and BrighRoll, presumably because they’re providing better targeting on niche sites.

Christopher Rick, ReelSEO, compares comScore’s report with Nielsen, another firm that measures online-video viewership, and he compares the strengths and weaknesses of the approaches.

Nielsen’s report shows online-video viewers watching less television (CBS News). And the NYTimes reminds us that online-video is still being talked about but not viewed. Huh?

comScore's July report shows May 2011 data. Hulu's last in unique viewers, but #2 in minutes per viewer (and #1 in advertising)

Online-video advertising spending looks to be growing again in 2011, even after an impressive 40% growth from 2009 to 2010. Media buyers surveyed by Deutsche Bank “Internet Industry Outlook” report (Jan. 18, 2010, see PDF). To fund online-video spending, many predict to cannibalize display advertising and some expect to move as much as 5% of television budgets.

“Video advertising will be the online ad format with the most growth momentum over the coming years,” comments Vincent Bonneau, Director of the Internet Business Unit at IDATE (source: UTalk).

Why? It’s not for the “higher engagement” reasons that we’d expect: Media buyers cite less clutter, better targeting, more professional content available, and lower cost of production (relative to television). Indeed I’ve seen many CPG brands commissioning video production for web, and at costs approximating 30% of what they’re spending for television commercials.

The audience of online video, of course, continues to grow. In November about 172 million viewers consumed 35 billion videos in more than 5 billion sessions.

Online video, next to social and mobile, appears to be growing faster than most digital advertising

What’s YouTube’s Profit?

While Google keeps YouTube revenue under wraps, it claimed recently to have doubled in 2010 relative to 2011. Christopher Rick (ReelSEO) is estimating its revenue in 2011 at $2 billion based on a Citigroup report (predicting $1.1 billion) and some solid or maybe conservative assumptions (using an adjusted CPM and not including homepage takeover programs). With online advertising spending reaching $28.5 billion, it seems reasonable to expect YouTube to fetch at least 3 percent of it given the deep relationships between Google and advertisers. If Google/YouTube paid more attention to media buying agencies, $2 billion would be a layup. Instead, I’d predict Facebook to be the beneficiary of dollars otherwise going to the world’s largest video platform. YouTube is, however, benefiting from both premium ad buys (minority) and targeted ads purchased via Adsense.

eMarketer, like Deutsch, reports double-digit percent growth for online advertising overall, and it’s poised to overtake newspaper advertising spending in 2011.

Online advertising spending, overall, is growing in healthy double digits

Digital Spending Versus Offline

What strikes me as particularly interesting is that online advertising (as it surpasses $30 billion) is not just overtaking print (newspaper), but becoming a larger and larger percent of the overall advertising mix. Online ad spending was, just years ago, a paltry 3-5 percent of the marketing budget. Now it’s well into double digit percents (see Deutsche graphic below). This could change more dramatically if media buyers move even small portions of those bloated television budgets to fuel online-video advertising.

Online ad spending is becoming a larger percent of offline ad budgets

Will online-video dip into those beefy television budgets? I think it will this year, but much more so in 2012 as advertisers become comfortable with the medium and viewing becomes increasingly easier and mainstream.

Consumption Changes

Online-video used to be the workplace escape. But we’re seeing those Wednesday online-video view dips, and stronger weekend views (see Tubemogul/Brightcove report), as people become more comfortable watching content on web-TV devices and gaming consoles. We’re also seeing broadband subscriptions grow to 500 million.

Online-video is converging with the large screen we call HDTV (devices are proliferating and long form consumption is on the rise), the medium will benefit more naturally from the far heftier and less scrutinized television budgets. Just remember, kids. IAB said to keep it “mature.”

If you’re an entrepreneur interested in the Internet marketing and online-video, you’ll want pick up “Smarter, Faster and Cheaper,” which is a refreshing take on the space by mini-maven David Garland. My first impression of Garland, a fellow Wiley author, was jaded by his “as seen on ABC” logo and cheesy pocket hanky. I thought he might be one of those multi-level marketers or “get rich quick” dudes, who suck you into a spam vortex and start pimping eBooks. But we love ya anyway, Joel Comm. And congrats on the weight loss!

Anyway, oh contraire on that first impression. During our 1-hour chat before this interview (see The Rise To the Top) I discovered he’s quite a likable chat. He also told me I was harder to pin down then the celebrity authors who endorsed his book, which was a sad reminder I need a virtual assistant.

Check out Garland, and enjoy this little interview. It’s worth the click. I’d embed it here, but the mini maven deserves some more traffic, even if he’s got loads.

David Garland interviewing Nalts, who lacks the pocket handkerchief but does the best he can.

Our friends at ReelSEO revealed the Pew data showing viewer’s surprising willingness to pay for online-video content. Until recently, I’ve been nervous about the notion of any subscription or pay-per-view model because it’s likely a “deal killer” for most viewers watching amateur creators. Sure I’ll pay to license/buy The Guild or Dr. Horrible, but less so for vloggers and amateurs (love ya, Charles Trippy, but “Internet Killed Television” is working quite well as free).

I’ve long maintained that the marketplace depended on advertising revenue since YouTube viewers are accustomed to free content. I believe the vast majority would protest a fee-based model — whether a token “pay-per-view” or modest subscription charge. Still, some would pay to avoid ads and access “extras.” But let’s try to avoid the dreaded but inevitable ”one-two-punch” models ($7.99 Hulu plus- where the “plus” stands for ads) that subject viewers to both a subscription and advertisements. I’m still sometimes perplexed why I pay for CableTV and get subjected to advertisements. Then again, it worked with magazine subscriptions.

Note: this post is me sculpting fog, and is subject to errors in logic. I hope you’ll comment so we viewers (and advertisers) can “crowd source” a solution.

Paywall of Doom (click for source)

A solution to the free vs. paid debate can be simple to the viewer, but certainly has nuances. The trick is that the model can’t be black or white, or binary. We need to provide viewers with options based on the proven success of “freemium” in software. “Freemium” refers to a trial version with limited functionality that is free, coupled with a paid premium offering (usually offering more stuff we value) that sustains the provider’s economic needs. This differs from the loathed “paywall” model that suddenly restricts content access to paying subscribers, a model that would certainly flop in the democratic and entitlement era of YouTube. Here’s what I propose:

1. FREE CONTINUES: Maintain free content for everyone with pre-rolls, Invids, banners, and Ding-Dong Fat Mamas (I made that last one up, but it’s not far from real terms like “takeovers” and “Fat Boys“).
2. PAY MODEST FEE TO ENJOY “AD-FREE” VIEWING: If the ads become intrusive, the viewer could chose to “opt out” 0f ads by paying a token fee (but volatile and difficult to preemptively set). A small fee today could easily offset the majority of paltry per-view payments that YouTube and the Partners receive from advertisers. The ad prices are now artificially low since the medium is new, and the media market hasn’t yet realized video’s impact. The problem, of course, is that fee is based on the advertisers perceived value of the particular audience. But common… if CableTV figured it out, so too should Google.
3. VIEWERS SUBSCRIBE BY VOLUME?: It would be difficult to offer a “subscription” fee at a channel-by-channel level. So this might better work as a comprehensive volume-based subscription. I imagine few Partners would have much luck creating an individual channel paywall. I’m one of a growing number of viewers, however, who would rather pay a few pennies for preroll-free videos and temporary “advertising immunity”… Those repetitive, unstoppable prerolls are what I find especially intrusive. In a great act of hypocrisy, I reluctantly subject my viewers to them because they’re far more profitable than InVid ads or penny-auction surrounding banners. To keep the solution fair, the user might purchase a bulk number of ad-free views in a beta (sufficient for a month’s worth of views, for instance) and continue if they wish.
4. PAYWALL WITH EXTRAS: Another model, albiet more complex, would offer subscribers additional “value adds” such as higher quality content, earlier release dates, or “extras.” This undertaking would depend on the percentage of the audience that would be willing to pay, and that segment that would certainly be small at first (thus decreasing creator motivation to produce extras). While I can’t envision more than 5 percent of YouTube viewers currently opting to pay, it might qualify them as “super viewers,” and I’d expect most YouTube Partners and YouTube to find ways to reward them fairly as VIPs.

The reason YouTube and other platforms ought to experiment with these models is that this: The noble attempt to earn money to encourage more creators and generate site profitability is, I believe, beginning to create “audience fatigue.” These ads are, currently, generating only a fraction of what preroll ads are likely worth. They’re also diminishing in value to brands if the frequency gets excessive per viewer. So I encourage YouTube or a smaller site to conduct a trial with viewers — giving them a choice, and ensuring that the “holdouts” don’t feel unfairly deprived (for instance by having their video quality diminished from what they’ve grown accustomed).

A few tips, since this hasn’t been with success in web video yet (for some valid reasons):

• This would have to be done carefully. As I mentioned, it would also be difficult for a viewer to select what “channels” to which they’d pay to subscribe sans ads– due to the varying individual tastes of viewers and the volatile quality/style/frequency of YouTube Partners. Unlike the relationship between network shows and fans, these relationships are less predictable. We also don’t want to create an awkward hierarchy among Partners (especially in a community forged with democracy and sharing). Again, if only one group (TheStation) created a perceived or real paywall, it would go over like a fart in church. Viewers resented when the comedic duo, Smosh, started moving viewers to Live Universe (alive?).
• The most practical and turnkey approach would involve a website (YouTube) allowing viewers a generous monthly number of ad-free views to those who paid a very modest flat fee. I acknowledge that the “devil is in the details.” The worth of an ad-free view varies tremendously based on the perceived value of the Partner’s audience to an advertiser. Due to advertiser’s particular desire for certain demographics (not content, or your perceived quality of it), a view of ShaneDawson or Annoying Orange might command a radically lower CPM or CPC than, say, Mediocrefilms or Blame Society. So a pricing model would be difficult to set based on the viewer. I may be stretching here, but there’s a potential “self healing” solution: presumably wealthier, affluent individuals are worth more to advertisers (and perhaps more prone to paying). Teenagers can sometimes be worth less at a CPM, so they’d pay less or just suffer the ads. Yes I realize we’d all change our YouTube profile age to “born 1989″ to “game the system,” but Google owns Doubleclick, kids. Don’t think it doesn’t know what you had for breakfast.
• Finally, it would have to be as easy as buying a show via AppleTV or iTunes. If I’ve got to remember my Paypal and input a credit card, my price sensitivity changes drastically.

Thoughts? How much would you pay to skip a pre-roll or avoid them completely? Or have you grown immune to their presence? What if suddenly advertisers wanted to pay more than you would to avoid them? How would you propose YouTube and other platforms adjust to balance the needs of two important constituents: we viewers and the brands seeking our hearts and wallets?

Well, he’s not crazy after all. Online video works even for the top brass it seems. A Forbest Insight study reported by eMarketer shows that online video actually has some business application… even in the coveted “C” suite (CEO, CMO, CFO and CIO). That last one stands for “career is over.” (Wait for laughter).

Rich, white executives like online video too!

Some important “take aways” based on the Forbes/Google survey of 300 c-level and executive leaders:

• More than 80% said they were watching more online video today than last year
• Nearly 60% of all respondents said they would watch video before reading text on the same webpage (but give them a choice please)
• 22% said they generally liked watching video more than reading text for reviewing business information
• Three-quarters of all executives said they watched work-related videos on business websites at least once a week, and more than half did the same on YouTube.
• A stunning 65% have visited a vendor’s website after watching the video (but that doesn’t mean that they do so 65% of the time they see a video)
• It is not clear how many of them have heard of “Annoying Orange” or “Fred.” The research wasn’t conclusive on that.

Before we get too excited, let’s recognize that they still prefer text for business information:

Text still leads, but offering them a choice appears "no brainer"

The biggest surprise to me? They’re surprisingly receptive to longer videos (about half said 3-5 minutes was cool)

47% of executives said 3 to 5 minutes is acceptable length according to Forbes/Google

Finally check out what they did after watching the video? Appears online video moved them down the purchase path.

This eMarketer graph shows that executives took action after watching videos.

So run along now and tell your boss, please. The online-video space needs more legitimization, and you can put this man to work.

“YouTube’s future is being held back is the typical innovator’s dilemma, or rather, billionaire’s dilemma,” writesAshkan Karbasfrooshan is CEO of WatchMojo.com. I included some of Karbashfrooshan’s pieces in Beyond Viral, and he’s one of the authoritative writers about the online-video industry and media monetization.

Google's Mansion and its YouTube Slave House

Indeed YouTube is but a toy kiosk in the Google “Mall of Americas.” Before I provide my 2 cents, here are some important highlights of his recent piece (with my comments in italics). His article was spawned, in part, by a “Video Forecast 2011” piece by AlphaBird’s Alex Rowland.

• Google is generating way too much money from its “traditional” search business ($30 billion) to care about radically owning the new video space (which is a small portion of the $2.5 billion Google counts as “display”).
• While YouTube commands 45% of the video streams in the U.S., it is unlikely that it will generate $600 million from video ads in 2010 (or 40% x $1.5 billion). (Hulu, he says, did $240 million… and with a tiny percentage of streams).
• YouTube correctly identified ad agencies and Fortune 500 marketers as those who would turn YouTube into a billion-dollar business.   However, since Google had little experience in selling to ad agencies before it acquired YouTube, growing video revenues took a lot of time to scale.
• But instead of allowing content partners set prices based on actual market dynamics (demand and supply), YouTube implemented a set of obstacles and requirements that have made selling one’s YouTube channel all but impossible. YouTube did this, I believe, in an attempt to thwart content producers from owning the relationships with media planners and buyers.  After all, if YouTube opened up its site, it would lose contact with advertisers and become a mere dumb pipe. (Indeed Google has been known to dismiss the role of the media buyer as somewhat useless intermediary… however the “dumb pipe” of Google’s paid-search network isn’t so dumb).
• Some would argue that if leading YouTube content provider Next New Networks’ indeed sold to YouTube (a rumor that spread in recent weeks, such as with this LA Times piece), it would be more of a capitulation than coup, for NNN relies so much on YouTube that it cannot possibly remain a going concern if it was not part of YouTube.

Now the WatchMojo CEO is a YouTube content provider, and has reduced the percentage of his company’s own inventory via YouTube from 45% to 15% in just the last past few months (by expanding his distribution beyond YouTube, since his YouTube audience has not contracted). He says YouTube is creating an “opening for others to win the bigger ad dollars,” and names DailyMotion, Metacafe and Facebook as potentials.

Now my thoughts: this isn’t a lone voice. I’ve heard this or similar perspective from content creators, advertising agencies, industry watch dogs and even some variations from YouTube/Google employees.

I would contend that Karbasfrooshan is more correct than controversial, and that Google is perhaps even “strategically ignoring” online-video’s near-term growth potential because it has far more critical business “levers.”

• Google has a cash cow in search-engine advertising, and is broadening into other mediums especially mobile. I expect YouTube’s growth to continue (it’s usually the case with the market leader), but its share of online-video display dollars will decline dramatically.
• Still, YouTube will continue to flourish via the middle market, lower maintenance, and “self serve” portion of the marketplace. This is almost certain without a significant “course correction” that does not appear imminent or within Google’s DNA.
• If Facebook begins to display video and share advertising revenue with content creators, I would imagine most — from Discovery to Annoying Orange — would start posting on Facebook quickly, migrating their audience, and even staggering/delaying content to YouTube (the way some providers like The Onion and College Humor do… first posting on their own sites, then weeks later posting on YouTube).
• Just as I don’t think my own content cannot survive and flourish outside YouTube (at least alone, hence my signing with Next New Networks), I do not believe Google is poised to grow or even maintain YouTube’s share of the online-video advertising budgets even remotely in relationship to its percent of video streams.
• The exception will be small companies and middle markets, or advertisers who are prone to buying via Adwords. Currently the vast majority of YouTube advertising dollars (with the exception of individual campaigns and homepage takeovers) are almost entirely driven by Adsense Adwords. You heard me correctly, and that’s a sad statement about Google/YouTube’s ability to sell direct to brands and/or via partners and agencies.

Large content creators and brands will and should want a strong platform partner which puts the audience needs and preferences first, but theirs at a close second.

So the answer to this post’s title is “yes… Google is squandering YouTube’s potential right now.” It is almost inarguable truth that YouTube is not leveraging the strength of Google and its global salesforce, and not winning the hearts and minds of Madison Avenue. It follows, therefore, that the stewards of large digital media budgets are now seeking — and will continue to pursue — alternative online-video advertising options for innovative programs beyond prerolls.

I’d expect to see AOL and Yahoo, if not Facebook, knipping away at Google’s online-video Achilles heal. Google, after all, is not a media property at heart… it’s a sleuth of engineers producing innovative change. Given that identity, Google can’t be underestimated as a bold market force that will continue to shake the online-video industry in ways far more interesting than hundred-million-dollar media buys, which are akin to vending-machine revenue at a casino.

In the meantime, content creators should:

• Ask YouTube to facilitate and encourage them to prevent agency buyers from feeling YouTube’s thorns. Likewise they need to aggregate to achieve sufficient strength to command the interest of digital buyers unless their niche is remarkable.
• Maintain good relationships with YouTube people, recognizing that many of YouTube’s shortcomings are out of their control.
• Diversify their distribution to include some of the smaller properties… especially those that grow. YouTube’s incentive to innovate for advertisers depends on market competition.
• Derive income directly via sponsorships… which is no longer discouraged by YouTube, a video platform.
• Pay close attention to what Google is doing with online video that has far greater potential than YouTube or any individual media property alone.

Beyond Viral: All the benefits of Ambien without side effects

So you’re too busy to buy a copy of my book (Beyond Viral), but maybe want a quick scan of the topics? Here are some of the key points addressed in each of the 18 chapters… these digital documents also identify the many experts who contributed to the book.

The cheat guide to Beyond Viral

From Daisy Whitney (This Week in Media), Mark Robertson (ReelSEO) and Ben Relles (Barely Political/Next New Netowkrs)… to  ”YouTube Stars” like CharlesTrippy, VenetianPrincess, RhettandLink, ShayCarl, Mediocrefilms, and Daneboe/Annoying Orange. Thanks to all of you!

Here’s the Beyond Viral (www.beyondviral.com) on Scribd and Slideshare.

It’s called a “sneak preview,” but I hope you’ll read it and consider picking up the actual book. There was no way I could have summarized it in 5-20 pages because the book has loads of examples and details.

So the book site (BeyondViral) is pretty darned live for this weeks’ official release.

From now on, if you put your hands in this position you're stealing intellectual property.

Now c’mon WillVideoForFood “backrowers.” You’ve done majestically on Amazon’s ratings. Let’s show David M. Scott (he’s like the Fred of social media) how fun people respond to blogs. He and Steve Garfield helped get me into Wiley’s New Rules for Social Media, and he’s blogged about Beyond Viral. Who’s got some comment humor in him. Rumor has it even Sukatra’s got WVFF access from her phone.

Who wants to read thoughtful reactions to literature? I’m guessing David M. Scott has never experienced a mathematical correction from Alexis (apparently “exponential” is not what I think), a bowel joke from Nutcheese or a Reubnick quip. Jan’s probably got a funky political angle. Here’s hoping Marquisdejolie links back one of his bazaar videos, a term I’d use more often but for Maryln. What ya got Punchy, Zack, Coffin, JimmerSD? How about my sisters and bro? They visit. Really.

I got a few notes that the book is in stores, which tells me either:

• This isn’t some elaborate prank on me, or a dream.
• Or that I’m still dreaming

Wow. I blog in my dreams? That’s kinda lame.

Amazon sent me a gift certificate for free copies, but I think I’m going to use it to buy a remote-controlled airplane toy with a video camera instead.