Is Google Squandering YouTube’s Potential? Yes, So…

“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.

The Problem With Predicting the Future of Online Video (and the magic of marketers)

Ladies in gentleman, in this seminal post, I shall speak to you not as a video entertainer but as a student of psychology, a practicioner of marketing, and a former magician (age 10). Watch in awe as I explain why our human species has trouble predicting the future, why some of my online-video foresight has been subject to such annoying external factors (not my own failures, of course), and how marketers survive. Then gaze in bewilderment as I change the subject so artfully that you conclude with a round of applause for my genius, and your keen intellect and humor for appreciating it.

As you loyal readers surely know, this blog has periodically devoted itself to predicting the future of online video (see 2006 post), and my soon-to-be-published “Beyond Viral” has a short chapter that attempts some quite risky futurspection*. It may not surprise you that it was the last chapter I wrote, the one I procrastinated the most, and the one that will surely be wrong in as many ways as it’s right.

But you and me? We’re a lot alike in that way. We are all clueless at predicting the future, even though we’re masters at looking back in time to convince ourselves otherwise. We revise history to confirm that we purposely selected the path we stumbled into quite by chance. Ask yourself about the last major change you made (change in job, relationship, geography, etc.). If it was more than a year ago, the reasons you recall justifying it are entirely different from the ones that caused it. By now your psychological white blood cells have attacked that virus of a notion, but let’s move on… Common, drop it I said. Dropppp it. Keep reading. Good boy.

There are, of course, a number of problems our species has with making predictions:

1) We can’t escape “present bias” in making  predictions (a subject well explained in Dan Gilbert’s “Stumbling on Happiness“). For instance, in this 1960s futuristic view of today’s technology (video below), you’ll see that both members of the household enjoy the use of “televisions” (not monitors) and hand write communication that is sent from a “post office” in their very homes. What makes this video so humorous, of course, is that it completely overlooks the changes in gender roles. Wife is spending, and husband is busy using his multiple monitors to figure out how to pay for them. Oh, and neither have apparently adjusted their hair for the future.

I encourage you to check out Gilbert’s book if you share my interest in pursuing happiness, spiritual curiosity, amazement with psychology. I believe my next book (yes it’s time already to think about that) will be partially drawing upon Gilbert’s wisdom to provide marketers with new and entertaining ways to manipulate us transparently: let’s call it transmanipulation*. Does that sound odd? Than you haven’t seen my video about why I decided to become a marketer (click to see video about my experience with the $1.25 “flying ghost”).

Where was I? Oh- check out this video and ask yourself why it’s odd. The multiple monitors? The pen reader? The haircuts?

2) We tend to overestimate the short-term changes, and underestimate the long-term ones. (Better put by Naughton in 2008, “THE FIRST Law of Technology says we invariably overestimate the short-term impact of new technologies while underestimating their longer-term effects.” When I began imagining the future of online video in 2006, I expected online-video and television to have merged by now. But I failed to imagine far more interesting things like how we’re slowly beginning to consume more video from our smart phones, and about how television and online video continue to co-exist.

The big stuff creeps up on us like the frog in water that gets slowly hotter (legend has it that he’d jump out immediately if it was boiling to begin with). If you haven’t heard this analogy before, or investigated the flaws in it, then you really need to spend more time with some marketers.

3) Vested interests retard progress. This quote, from a wonderful 1950s article in Popular Mechanics predicting 2000, explains this challenge well. When I imagined integrated online-video and television, I underestimated how the economic interest by cable providers would delay what is readily available. Although ANYONE with moderate income can enjoy online video from their HDTV, few do. That’s because most of us are so lazy or uninformed that we default to the box that Comcast or Verizon sell or rent us. Then we laugh about how our grandmother is still renting a rotary phone from Mah Bell.

Predictions for 2000 (Popular Mechanics, January 1950)

Yes, friends, today’s technology is not entirely driven by possibilities and your preferences and demand. You’ll get what the economy rewards, even if that means you’ll buy your iPhone and iPad and give up Flash. And you’ll switch from one telecommunications provider with great coverage and low prices to another… because your emotional desire for beautiful and prestigious gadgets overrides your logic. Sorry, folks. The brain is the rabbit in the “hare versus turtle” tale. Bet on the heart.

Wait this time I switched subjects by accident not on purpose. But just out of curiosity, did you click the word “retard” in this section’s title?

4) We selectively recall predictions we and others called accurately (and ignore or forget the ones that were wrong unless they were wonderfully and profoundly wrong). This inarguable psychological nuance is the basis for a booming industry of futurists and psychics. Even their victims help their cause, like many Notradamus faithfuls do when selectively interpreting his predictions. But before you feel too proud to be above that, consider why you might visit a psychic… then later recall just a few of the things he/she predicted quite accurately. You know the Pied Piper is manipulating you, but dang that pipe plays a mesmorizingly* attractive tune.

While in 2006 I predicted fairly well the consolidation of online-video sites and the evolution of a network aggregation model (Hulu), I also thought some online-video stars would become television and film stars. Whoops- failed to appreciate that the television/film economy still mostly under estimates or snubs “weblebrities,” and that many have gained more income and larger audiences by NOT being plucked from web obscurity and graced with attention from talent agencies, representatives and producers. I’m also seeing more clearly that what makes a web star (talent, self sufficiency, persistence, social networking, interaction with audience, thick skin, diversity of skills) is quite different from what makes a television or film star (good looks, acting chops, Hollywood network, good timing, the right gene pool, ass kissing).

And of course sometimes I like predicting things unlikely just to generate some controversy or get people to think.

So why, you ask, am I reflecting on the “problems of predicting the future of online video” (or any crystal ball gazing)? You didn’t ask that, but I made you think you did.

Well its’ pretty simple. I’m using this post as an exercise in addressing cognitive dissonance with public use of rationalization, ego defense and misdirection. But now you think you saw that all along, right? In 2006 I predicted “marketers will get smarter” about online video. And although financial predictions suggest 2011 the space will flourish, I failed big time on that account. As a career marketer, I should have known one thing with certainty. We marketers will not get smarter in a year, or even a dozen years. We’re an impressive group with lots of sizzle, but smarter? So naive I can be.

We marketers lack the balls to sell or the intellect to create something. But we’re psychological masters of that odd space between creating (Beta tapes were good) and selling (VHS tapes were adopted), so we market!

Sure it's snake oil. We both know that. But isn't it fun to pretend it will solve all your problems and make you happy forever?!

And you’ll watch with amazement at our brilliance! Stand with mouths agape as we’re targeting important segments, generating unique consumer insights, identifying real and perceived value propositions, engaging and converting prospects, articulating benefits not features, and (of course) executing flawlessly. Yes you’ll watch our show like first-grade children enjoying their first magic show. Some will see our slight of hands, but all will leave with astonishment and wonder.

(Insert applause here)

* I made us the words in asterisks, and I hereby trademark them (c) Kevin Nalty 2010.

What Media Buyers Need to Know About Online Video

What perfect timing. I watched this “New Media Minute” by Daisy Whitney, and  was interrupted by a Product Director who’s seething over his clueless media buyers. My client, like me, is perplexed and annoyed by the inability of most media buyers to speak succinctly to brands about two simple things: whether the media spend is, simply, “on strategy” and “on budget.”

The details are noise, and we just want to be convinced the media-buying firm is not completely clueless. Like maybe they’re buying based on efficient and high-impact opportunities and not to payback for the dinner AOL bought. I mentioned that some media buyers are the people from high school that could have chosen careers selling cars or mortgages, and generally had C averages (but to be fair, they dressed well and always knew how to tap the keg). He recounted his friend who “was probably 400 in a class of 399” and is now quite wealthy in the media space.

I really shouldn’t poop on media buyers until I walk a mile in their Manolos.

On a particularly good hair day, Daisy Whitney tells us Pepsi's putting its Superbowl coinage into creating its own BudTv.

But imagine how frustrating it is — to a marketer and video creator — to read eMarketer reports that online-video is projected to grow at a bullish 30-40% annually…. but knowing that it’s all in the hands of career buyers of print and television who like driving f’ing awareness & attitudes and CPMs and anything else you can’t connect to sales.

People, video has the great potential of driving awareness, but also trial... dare I call it a “direct response” medium that “traditional media buyers” misunderstand, fear, loathe? Media buyers are to “direct response” and sales what belly dancers are to FIFO. And even the Wall Street Journal (a publication you’ve not heard of because it requires a subscription) says snail mail is still hot.

(Oh- you’re not a “traditional media buyer” if you are reading this article, unless someone sent it to you to chastise you).

I find Daisy’s characterization of marketers and advertisers hoping to “buy not rent” audiences a bit quaint, even if it may well be accurate. How many of us wake up each morning curious to know what entertainment P&G or Kraft has cooked up for us? Seriously? Pepsi is apparently bagging the Superbowl and launching some online thing that may or may not be fabulous. It’s “the next great thing” or BudTV.com all over again. We can’t be sure, but I suspect we won’t bookmark it. It reminds me of pharmaceutical brand managers in 1999 aspiring to have their website as the “home page” of every physician. Fat chance, but sometimes time is the best teacher.

I do like the theme of marketers shifting from interruption ads to the creation of engaging content and entertainment. Yey for that! But we impatient and ADHD-driven online-video carnivores are not likely to find it without some help from PR and ad spending.

Fortunately we’re seeing some new “video” ad networks (Daisy names Yume and Scanscount) that might help media buyers go beyond prerolls. I wonder if these companies are sophisticated enough to monitor their names in social media. First company to comment below wins a free pixel.

Read this TechCrunch piece by WatchMojo’s CEO for some tips for content creators looking to snatch some of the massive online-video spending (the writer leads a company that does branded entertainment, which is about as pervasive these days as ad networks). According to WatchMojo: “Unlike articles, you can’t fool audiences as easily with videos. It’s easier to get away with a slapdash article than with a slapdash video.”

Well that’s news to me. I’ve been fooling audiences a few hundred million times.

So here are some tips for the ambitious media buyer who, at least, wants to sound smart when speaking with a brand:

  1. Acknowledge that online-video is growing, and that budget should follow the audience.
  2. Don’t spend it all on pre-rolls. We hate them as much as you.
  3. Find people who have already assembled an organic audience, and sponsor them or buy product placement. Go direct to the big ones (NextNewNetwork, Revision3) or use Hitviews, PlaceVinePoptent or Zadby to broker deals with smaller guys. Did I miss any intermediary between popular web content and marketers? Don’t be afraid to raise your hand.
  4. Partner with content providers and online media players to create webisodes that are entertaining AND engaging (with an emphasis on the former, since the latter depends on it). You’ll need a “branded entertainment company,” but be sure they have an idea of how to get the crap seen not just make it fabulous.
  5. Buy the crap out of ad inventory that are driven by search (if they’re searching for your brand, you want to be there first).
  6. Customize your content because if I see another 30-second spot as a preroll I’m going to power puke.
  7. Use rich-media ads with compelling video content and an irresistible “call to play.”
  8. Buy every Nalts InVideo ad you can from YouTube regardless of the CPM. I heard his content attracts your target buyers, and that they’re 45% more likely to engage in your ad because his videos are so bad.

10 Predictions for Online-Video in 2010

I’m a bit late on my online-video predictions for 2010 (unless you count this December post). The landscape continues to change, and it seems the world has been slow to catch up with my 2008 and 2009 predictions. Heck I even made a video in 2006 predicting 2007.

Here’s what I’m seeing in Online Video for Twenty Ten. Don’t forget to read the predictions from December from many WVFF guests who be smarter then my.

  1. Continued web-to-television bridges. While we’re still far from a merge of cable, television and online-video, we’ve seen some interesting changes already. Roku, Netflix, AppleTV, and a few brave television manufacturers pre-embedding software and wireless access or Ethernet plugs. I’m going o once again bet on the lazy man’s alternative to setting up their own PC media player. I see a $199 device that allows us to access the Internet right from our televisions. It’s a small PC, a remote-controlled keyboard and mouse, and it plugs into any television via HDMI or even less progressive connections.
  2. More stars dive into online video. Ashton Kutcher, Felicia Day, Tom Green. These guys have embraced new media, and there’s a wild rush to Twitter. 2010 is the year that more stars put themselves on YouTube. Don’t believe me? Wired reports Kutcher IS the future of video. They won’t always “go viral” but their strong fan bases offline will propel them to the most-subscribed pages of YouTube, eclipsing many of the web purists.
  3. AOL, Microsoft, and Yahoo Catch Up. Ironically, the laggards are web portals and search engines that had a media bent a decade ago. Google leapfrogged them with YouTube. They can’t stand on the sidelines forever. Watch for these players cutting deals with larger players (cable, telecommunications, etc.) to establish their dominance. Since it’s almost impossible to battle YouTube directly, they’ll focus on partnerships with tech companies and premium content providers. The result may not be as popular, but it will command the attention of advertisers that like pro content and “safe” plays.
  4. Programming Not Sporadic. When I was posting daily, I didn’t realize how important that was. It kept my audience active, and ensured my recent videos got 50-100,000 views. In past months, I’ve posted unpredictably and as little as 10 times a month. The result? I’ve plateaued. Meanwhile the regular posters (Sxephil, WhatTheBuckShow, CharlesTrippy and ShayCarl) are souring. The creator community is learning about the vital need to post predictably. ZeFrank used to post at 1:00 daily. TheOnion was always updated online on Wednesday. If you’re not predictable, you’re forgotten. Many amateurs are hosting live shows once a week, and the crowds flock to see their favorite “stars” unplugged. Audiences like routines.
  5. Division of Audience Focus in Conferences and Publishing. In the early days of the Internet, attendees included marketers, tech folks, and about every other business function that thought the web was going to be more than a fad. Online-video conferences and publications have taken the same approach. Watch in 2010 as conferences and publishing focus on more concrete audiences. AdTech for advertisers. StreamingMedia for technology people. And other conferences for marketers or web-studio playas. These conferences are too frequent and too broad to serve any audience well.
  6. Niftier Audience Participation. We’re still doing little more than putting VHS tapes online. The power of Web 2.0 (or 4.0 or whatever the hell you want to call it) is the interactivity and the engagement it facilitates in storytelling. Sure we saw 2009 videos that took advantage of “annotations” to create “choose your own adventure” series. But watch as advertisers and content creators merge to create more robust engagement experiences built on video, but with lots of tools that create a deeper, immersive experience. SevenEcho is one company to watch.
  7. White Dwarfs and Luminous SuperGiants. The lifecycle of the average weblebrity is compressing, despite a handful of amateurs that have maintained a vibrant presence. In 2010 we’ll see some new talent and more popular talent fading. There are not many people that have the persistence and creativity to sustain a continued audience. There are “Gary Larsons” that burn bright but short. There are Charles Shulz’s that don’t stop until they die (or their lines become jagged like someone drawing on a motor boat).
  8. Advertisers Forced In. Every year we predict advertisers will finally embrace online video (but the spend levels are not proportionate to the audience reach). That pretty much HAS to change dramatically in 2010. Not enough impact on television’s fragmenting and depleting audiences. So even the most traditional and laziest media buyer will be forced by marketers to spend more and spend more wisely. Watch for more obnoxious takeovers on YouTube and other sites, but also some clever alternatives that get brands “inside” the content.
  9. There is No 9th Preduction. That’s because I have to go wake up the kids, and don’t have time.
  10. News, News, News. We have watched as “consumer generated media” has made its way to many televised news stories. Now that cell phones with video cameras are fairly common, we’ll see more of this. And that prediction I made years ago… a live broadcast from some crisis directly from a person’s cell phone? That’s happening in 2010 or I’ll stop predicting it. I promise.

Video View Count: Short Shelf Life vs. Long Tail

forecast video viewsTubeMogul reports on the short shelf life of online videos (courtesy of ReelPopBlog). While it’s true that 25% of video’s views tend to occur within the first 4 days, this is a bit missleading. First, TubeMogul focused on videos exceeding 1,000 views and the website is used more by serious content creators looking for broad distribution. Second, this means that 75% of the videos occur over an extended period beyond four days.I can usually tell within 4 days if I have a hit or a flop, but many of my 650 videos have a “slow boil.” My most popular videos continue to garner views in aggregate, and that exceeds the count of the most recent videos.In a similar model, a blog tends to start with a dozen readers. Then that eventually grows to hundreds and thousands. The delusional blogger begins to believe that his daily posts are read by hundreds. In fact, those visits are aggregated views to the creator’s entire legacy of work. The long, long tail.If I stopped creating videos, it wouldn’t be long (6-12 months) before I was forgotten nearly entirely. But for a period, my old videos would continue to get views as people stumble into them via related videos and random searches.I try to keep a rhythm of creating daily — or every few days — because that fuels viewer interest in my old work and also gives the viewer a reason to subscribe. It also helps keep me from getting constipated. I was constipated yesterday for real. Man did my farts stink.