Can Google Sell Online Video Ads?

There’s been a lively debate recently among online-video enthusiasts about Google/YouTube’s capacity to sell display advertising. Sales people need different skill sets selling paid-search (automated, measurable, bid-based) versus display advertising (which is less measurable and more like selling television or print). To understand the distinction, see Google’s video; this is something we’ve been exploring at WillVideoForFood since Google bought YouTube in 2007. While Google has deep relationships with top companies and industries, it has only recently put emphasis behind non-search advertising.

YouTube’s display team (a few dozen) is rather small, and most YouTube ads are sold via Google Adwords not the dedicated team. While the display team sometimes lands some comprehensive ad buys with advertising agencies and brands, most monetization on YouTube is marginalized. The CPMs (cost per thousand) are so disappointing to some creators and online-video studios that some (from Next New Network and Revision3 to TheStation) have begun to sell their own inventory, or partner with ad networks that can attract better monetization for their views. Increasingly YouTube has provided creators and intermediaries tools to sell their inventory directly.

That said, there was some encouraging news from Jonathon Rosenberg, Google’s SVP for product management. According to this eWeek piece titled “Google YouTube, Android Drive $3.5B in Ads.”

Google’s display ad business… operating at an annualized run-rate of $2.5 billion. That’s counting YouTube ads, and all non-text ads running on Google’s network and DoubleClick networks, Jonathan Rosenberg, Google’s senior vice president of product management, said on the Q3 earnings call. “You guys always ask me (referring to analysts)… where’s your next multi-billion dollar business after search,” Rosenberg said. “There’s your answer.”

YouTube’s Financial Situation & Saucy Details from Viacom Suit

The New York Times “DealBook” blog revealed some saucy stuff based on the thousands of pages of court filings made as part of Viacom’s copyright infringement suit against YouTube.
  • Viacom employees had secretly uploaded videos from the company’s movies and shows even as they were complaining about copyright violations, as The New York Times reported. Zoing!
  • USAToday’s “Juicy Details piece” puts it like this: “Google cites a marketing executive at Viacom’s Paramount studio who said that clips posted to YouTube “should definitely not be associated with the studio — should appear as if a fan created and posted it.” To accomplish that, Google says that “Viacom employees have made special trips away from the company’s premises (to places like Kinko’s) to upload videos to YouTube from computers not traceable to Viacom.” Kinkos FTW.

Payouts earned from the YouTube sale, as detailed by All Things D. Chaching! That’s a whole lotta sheep.

  • $516 million to Sequoia Capital
  • $334 million to co-founder Chad Hurley
  • $301 million to co-founder Steve Chen

All Things D also pulls some revenue figures from YouTube’s inception in January 2005 through August 2006, the last month before the company sold itself.

  • It wasn’t until December 2005 that YouTube started pulling in revenue, and it wasn’t until August 2006 that the company turned a profit. (The company showed a 186 percent jump between July and August of 2006, to $2.5 million.)

Wired Magazine also had a lengthy story documenting YouTube’s past 5 years, but it’s not online… which I find really annoying. Basically YouTube isn’t bleeding anymore, but it’s not exactly a “cash cow,” as Wired states (clearly someone didn’t read the Wikipedia on cash cow before filing their piece). I’m so over Wired.

YouTube Partners Get Rich Despite YouTube’s Reported Loss

How much does a YouTube Partner make? It depends on a variety of factors. But it’s more than YouTube is making.

Josh Chomik, a 16-year-old high school junior from NJ, told the NJ The Star Ledger that he’s making $1,000 per month from his videos as  YouTube Partner with alias “Thecomputernerd01.” As I’ve reported a number of times, Michael Buckley, who hosts a celebrity gossip show on YouTube, quit his day job last year because his six-figure income was better than his day job as an administrative assistant.

Meanwhile, Credit Suisse speculates that YouTube will lose more than $460 million this year. Analyst Spencer Wang (let’s go easy on the name jokes) estimates partners make 0.4 cents, a number I’ve found to be wildly over stated.

I can’t validate this, but reported estimates of YouTube partner earnings range from $800 to $2,000 per million views. And nobody can tell you for sure, because it depends on where the videos are seen, how to ad inventory is sold, whether the ads are “pay per view” or “pay per click” and other factors.

But Wang attributes the real bleed from the horrific cost of streaming YouTube consumer-generated videos. While Partner content is profitable, the majority of video streaming is offset with paltry revenue from ads that fetch pennies per thousand views.

As a YouTube Partner, I have mixed feelings about this dilemma. I am confident that Google will determine a way to profit from its majority share in online-video viewing. But I feel like a shop owner in a mall that’s unprofitable.

  • Will the mall close? Probably not.
  • Will YouTube find a way to revitalize the mall by inviting major retailers (professional content)? Probably so. And just like a mall retailer needs foot traffic, I need both “views” and ads surrounding my videos… or I’ll be a corporate dude until I retire at age 90.
  • But what will that mean to my little “Nalts” show? Will my shop be pushed to lower level, far from the foot traffic of the food court and major entry ways? Or will the pie grow so dramatically that I will continue to profit even with a smaller sliver?

As SNL alumnus Chris Rock says, “They’ve got the white mall, and the mall white people used to go to.” You know, I’m not sure that quote carried my analogy forward, but it’s funny anyway.

I am terrified of reporting my own income because I’m contractually forbidden (and I find it almost as obnoxious as my son Charlie flaunting to his siblings the 52 dollars he’s made for staring in my upcoming Oreo videos).

But I will tell you this…. Last month, thanks to an unusually popular Superbowl video (nearly four million views), I totalled about 7 million views. That gave my family our biggest Google check to date — still not enough to quit my job as a marketing director with four kids and frightening debt. But it was, after taxes, bigger than the 2008 annual bonus from my day job. Don’t get jealous, though, because our bonuses were weak this year and last month was not typical of my regular income (and remember I spend several hours a day slaving to create and promote my videos).

One thing’s for sure, though. If marketers and agencies fulfill the eMarketer projection on growth, it’s going to be a good year for YouTube, Partners, and those of us who want to enjoy free content even if it’s ad supported. Here’s the quote to which I refer:

Video ad spending this year, according to eMarketer, will run counter to overall economic developments, rising by 45% to reach $850 million

Hulu.com: Full of Hot Air; AppleTV Must Save Us.

I got all excited when I read that Hulu.com will distribute DailyMotion.com videos. Sadly, like most of the most-subscribed YouTubers, less than 5% of my traffic occurs beyond YouTube. I couldn’t even remember if I post to DailyMotion. That’s because YouTube dominates, but also because people on other video sites aren’t as loyal to them, and watch a fraction (maybe 5-10 percent) of the videos per week that a hardcore YouTuber devours. 

Back to Hulu. A search for “Nalts” on Hulu oddly produces just one result. One. A bit lower than the 739,000 items that Google finds. And it’s… a link to my fart video on “Funny or Die.” Not “Farting in Public.” No, the original short film, in which I fart at my son. That’s hot air, friends.

It doesn’t appear that Hulu is yet picking up the DaiyMotion videos yet. And who knows if they’ll go beyond “official content.” You see, a Nalts search on DailyMotion reveals HBO’s HookingUp as “Official Content,” but the Nalts videos lacks that badge o’ honor. I don’t expect Hulu.com to attract many fans of amateur short-form content in the near term. And we can be sure that long-form, network produced content will rise far above the charming little YouTube weblebrities. 

In a hurry? Let’s get to the point, shall we? May I just pop the friggin’ industry’s “Hulu proved TV online works” zit for a moment? Can I just squeeze my fat fingers around this lemming-like nonsense and shoot some pimple juice in your eye?

  1. First let me acknowledge that Hulu is far better than I ever expected. It’s simple, and it’s proof that networks can play well together… when facing a common enemy. The hulu party is over, however, once we all have media devices that don’t care where the video lives (hulu or nbc.com), because then the networks will then again fight to get viewers on their own sites again… where they have control of metrics and ads.
  2. I don’t yet watch a lot of Hulu, because I prefer to have my long-form media intravaniously dripped while I’m in a reclining position in bed. And I like the HD quality of AppleTV/iTunes, or the cost/convenience of my NetFlix/Roku device (all-you-can-eat movies for $9 a month plus a $100 device).  I tolerate my horrible Verizon DVR (with its perverse $19.99 monthly cost), but that SOB going OUT tomorrow afternoon. It will be replaced by a TiVo plus a $5 Cablecard rental. Oh, sweet TiVo. I’ve longed for your angelic plink sound for two years. I did manage to get Boxee to stream Hulu on my AppleTV (thanks Peter Coffin), but I lost all of that when Apple pushed out an upgrade over the weekend. I’m too lazy to reinstall it, and it was a clumsy interface and poor quality. But I still dig Boxee, and it’s new.
  3. But back to Hulu and its hot farty air. I swear I’m going to punch the next journalist that rants about Hulu’s profit relative to YouTube. For starters, have you ever purchased media? Any print/TV media seller will gladly toss in an assload of Internet ads as a “value add.” So the networks, in a fit to jolt Hulu’s economic story, simply stopped giving away free Internet inventory. Given a relatively lean cost structure (outsourced to India), the Hulu site was *poof* “profitable.” And let’s put profit into context- I’d estimate that 5-10 minutes of Superbowl ads made more than Hulu.com’s topline last year.
  4. There’s no mistaking that Hulu is perceived as “safe” to advertisers. Just quality content. No crazy consumer-generated videos that corrupts advertising as we know it. Who wants their Cash for Gold ad next to David After the Dentist? Hulu solves that passive-aggressive motive of the mass media buyer (who regrets giving up his art passion for a soulless existence buying inventory). The media buyer can reluctantly “get digital” without having to actually talk to his agency’s red-headed stepchild — the girl we like to call the digital media buyer (he doesn’t mind suffering her mindless droning at happy hour, but her good looks are offset by the fact that without them she’d be working at the Department of Motor Vehicles).
  5. Meanwhile we have to assume two things. First, Google will find a way to monetize its 90 plus percent share of online-video consumption beyond the “tip of the iceberg” it monetizes today. And sooner or later, Google will give larger networks a vehicle to monetize content that’s at least as good as Hulu. 
  6. So the market is maturing, and I underestimated Hulu.com. But ultimately the game changer is not a website with all of the networks shows partying together with ads. That’s progress, but that’s just the first step of a much more interesting movement.
  7. We’re getting so very close to having one dang media center in our home that has access to our own digital video, and web’s. I want comfortable access from any TV in the house, without 12 devices and contracts. I’ve got my money on Apple changing the game (like they did with music and mobile/pda/phone) in 2009/2010 with a new version of AppleTV (someone right that down). The Supercharged AppleTV is going to play better with YouTube.com and Hulu.com, and it’s going to provide the option to download and watch in HD (as it does now) or watch in lower resolution with ads for free. Maybe there’s a monthly fee, but not 8 different ones. 

And that, friends, is lovely. And the only loser in my futuristic super-media device that will be the Comcasts and Verizons, who know as much as elegant interface as I know about how to write a short blog post. I’ll be glad when we dissintehrmediate these fools (even if they supertax our bandwidth), and so will Hulu and the networks. Hey Verizon- love the big pipe you installed in my home, but I can’t wait to fall asleep to the sweet sound of TiVo and know I’ll never have to use your stupid interface again. 

Well now it’s 10:30. I think wifeofnalts will be asleep, so I can probably sneak in a few episodes of Season 3 Lost now. I borrowed this season after buying the first two on AppleTV. And now I have no patience for changing DVDs and suffering through their irritating introduction and transitions. Meh.

You laugh, but some jackass analyst is going to find a way to organize and profit from these Nalts-futuristic insights, and I’m posting this nonsense for free.

Long-Tail Celebrities Won’t Get Famous and May Not Care

Here’s an excerpt of a wonderful post on Cracked.com titled “YouTubers That Will Never Be Famous.” It’s an opportunity for me to “clear the air” about being a self-proclaimed “weblebrity” (which is, you see, rather distinct from being a celebrity). LONG post, here, folks but this one is jam-packed with delicious goodness.

The internet is a big place, but there can only be so many Tay Zondays and LonelyGirl15s. Not everyone can become a crossover internet celebrity, and behind every one of these superstars there are a thousand others just like them, posting video after video and hoping one of them sticks. The following users represent only a fraction of a percentage of the YouTube users currently clogging up the internet tubes with absolute garbage – if you can think of others that deserve to be shamed, feel free to add them in the comments below. Or don’t, actually – additional exposure will only encourage them.

Let’s start by explaining that securing weblebrity status facilitates all the dysfunction of being a real celebrity, but none of the perks. You see, you receive hundreds of messages a day from viewers critiquing your work (probably more than many movie stars). The positive comments give you false self esteem, and the negative ones crush you like a lemon wedge. Eventually you develop thick skin, stop posting, or decide to find your self worth in a more healthy place (like at the bottom of a nice glass of vodka stired by a Xanax).

But, friends, there are at least 5 perks:

  1. We get constructive feedback about what people like and don’t like about our mindless short-form entertainment (so in theory we learn). People look forward to our stuff, and that’s encouraging. Remember that three years ago we bored dinner guests with our videos.
  2. We have a lot of fun. Shooting videos, editing them, collaborating, meeting fellow creators.
  3. Some of us actually get paid by YouTube based on a percent of the revenue it makes from selling ads around our garbage.
  4. We don’t really clog up the Internet. You see, there’s plenty of bandwidth around. It’s kinda like saying someone is wasting your sunshine (there’s an unlimited supply last I checked). Your tan doesn’t come at my expense… unless I have to look at your digusting, peeling skin.
  5. We don’t answer to anyone except our audiences. No producers to tell us to “dial it down,” or sponsors forcing awkward insertions. No “review team” or fear of cancellation.

Now let’s look at VisibleMode. Do I watch him daily? Nope. Does he watch me? Probably not, except when I happened to pick him for the YouTube Secret Santa (I sent him a mug so he could sell out like me).

VisibleMode is one of the top YouTubers in Canada, and Cracked.com’s pick for someone who won’t get famous. Obviously it would be even more interesting to see a Cracked.com list of the few YouTubers that actually might get famous (a harder list to write, and a shorter one).

So now I’ll get to my point, which Cracked might have overlooked. VisibleMode may not soon be in a b-grade film or even an extra in a television commercial. Heck even Michael Buckley (one of the fastest growing, and television-ready weblebrities) may fade like many stars. But VM tells me today he’s had 6,760,748 cummaltive views of his videos. If Google sold those InVideo ads surrounding his videos at $20 per thousand ($20 CPM is the list price), VisibleMode would have hypothetically taken a portion of more than $135,000 that advertisers would pay YouTube/Google. Let me say it again. Even if most of the ads weren’t sold, the CPM wasn’t $20, and VisibleMode only got a small portion, he’d be making decent take-home per month. Will it last? I’m the wrong guy to ask, because I would have bought Revver stock. But I’ll bet he’s enjoying the ride and not too worried about missing a red-carpet event in LA.

The sustainability of YouTube and weblebrities, of course, hinges on advertisers garnering an ROI on the ads that surround this content. They’re fairly targeted and hard to ignore. And they’re in the context of content you’ve chosen to view. So the branding benefit should be worthwhile (a cent or two an impression) even if the direct-response may underwhelm more transactional brands. 

So assuming marketers sell products (or believe they are) via YouTube promotion, the advertising revenue will flow. A shake-down of creators will naturally occur, but the audience of YouTube is growing in depth and frequency, and media consumption continues to fragment. There’s a volume of valuable ad inventory lurking in the long tail, folks…. so...

  • Weblebrities might enjoy a decent side income without ever becoming “famous.”
  • Viewers will have a greater selection of garbage to fit their unique tastes- some cheesy stuff blended with unique, unscripted and short entertainment.
  • YouTube/Google will make some money as well-backed middleman. Heck maybe they’ll buy Cracked.com.
  • Advertisers should enjoy a decent ROI in an emerging medium that’s bound to resemble future television buys more than current television ads will.

Nalts may or may not appear on SNL, but he’s having fun while this lasts. I just wish Cracked would have picked me for someone who’d never get famous. Hey- I know. I’ll do a sunburn video. Worked for ShayCarl.  

How Much Money Does a YouTube Partner Make?

All the YouTubers are cruising with these. Let's not let them be the only ones, dangit.
All the YouTubers are cruising with these. Let’s not let them be the only ones, dangit.

Editorial Update…. here’s a newer post on how much YouTube partners make. Since this post gets so many daily views via search engines, let me answer your question simply. It’s a fraction of a fraction of a penny per view. It’s not enough to cover the mortgage for most, and it’s certainly not yet the reported $2.50 per 1,000 views. It’s often far less, and varies greatly on whether the views have InVideo ads (YouTube charges $25 per thousand and shares that with creators) or the flat square ads (cost far less for advertisers, and doesn’t pay creators). Although I can’t reveal my income, I can tell you it’s highly influenced by my top 5-10 videos, which get millions of views per month (as opposed to the new ones). That said, if you get millions and millions of views per month and live cheap, you could quit your job and buy my dang book, “Beyond Viral.”

Beyond Viral: Tips on Marketing You & Company on YouTube

YouTube’s Fred was rumored to be making seven-figures, but Google clarified that as six figures. But if you take his 350,000,000 views and multiply it by a conservative $1 per 1,000 views…. you’re talking $350,000.00. I’m making more on YouTube than I made in my first job out of school, but with four kids and a lot of debt, it’s not enough for me to pull a Sxephil, Shaycarl, or Michael Buckley and rely on it as a primary income source.

Oh how’s THAT for a blog title, when you’ve signed a confidentiality document that precludes you from talking about your revenue as a YouTube partner?! Don’t worry, YouTube. I’m not breaking rank. But I’m very interested in what people THINK partners are making.

Before YouTube, I’ve always been transparent about my revenue related to online video. I feel that’s part of my role on this blog… to give creators a realistic sense of what they can make in online video (beyond food). Alas, YouTube prohibits it for reasons that aren’t quite clear to me — are there tiers? If compensation varies, then I can be sure I’m at the bottom based on my complete lack of negotiation skills.

I do believe that some prominent YouTube partners are beginning to earn what amounts to a full-time job through the site. But I also understand that some of the early Partner contracts are up for renewal about now.

  • Could some be overstating their earnings? Yes. But some partners are doing $10K a month, especially those that already had an audience and moved them to YouTube. And some creators get millions of views consistently.
  • When some say they’ve quit their day jobs, is that because their costs are so low that even a couple grand a month can sustain them? Maybe.
  • Could the earnings be based on a point of time where, say, they had a video featured that was monetized? Sure.

While there’s no question that many could still earn more money per hour doing something else (like consulting or bartending), I am happier with my income from YouTube than what I was making from YouTube before I became a partner (zero). And while I’m not sure whether the per-view profit is as strong as Revver’s and Metacafe’s (I don’t even have access to any such metrics), I’m not getting any significant views on those sites anymore. So YouTube is far outperforming them.

My advice remains: if you’re looking to get rich, create a bunch of mortgage blogs and sell adsense. Or go into financial services or recruiting like the former co-worker that just called me to “network.”

But if you love video and the community around it, then it’s nice to get an income subsidy that helps you justify the time commitment to yourself, wife and family. I remain optimistic that more of the top creators of YouTube will be able to quit their day jobs, but that’s partially because amateurs will slowly get trumped by the semi pros (whose day job is performing or video creation). It’s already happening. While the amateur vloggers are holding top positions, we’re seeing more semi-professional content done by comedy troups, bands or known offline celebrities.

Now here’s the purpose of my post. I’m curious what people THINK partners make. I can tell from a lot of comments that people WAY over estimate what creators make: “You get paid for this shit?” “You’re asking us for ideas? You’re the one who gets paid.” I can’t participate in this thread, but it will be fun to watch.

And if you’re not a Partner yet, don’t let it upset you unless you have hundreds of thousands of monthly views. Grow the audience and reapply later. Even if YT did make you a partner, it’s not worth it unless you have some views. Take it from a guy that tried Google ads on his blog for a while, and quickly realized that it wasn’t worth the cosmetic interference.