Sunday, September 10, 2006

How does YouTube make money?

The Economist has an article about the business model of YouTube. The key question is how the site makes money out of people posting amateur videos (which costs a lot in terms of bandwidth and data storage). The main answer is that they don't really have a way of making money yet. Here are their two ideas right now:
Aware that inserting advertisements at the beginning of video clips, as some sites do, is annoying and risks driving away YouTube's users, Mr Hurley and Mr Chen have announced two experiments with advertising, with the promise of more to come. One idea is for “brand channels” in which corporate customers create pages for their own promotional clips. Warner Brothers Records, a music label, led the way, setting up a page to promote a new album by Paris Hilton. The second experiment is “participatory video ads”, whereby advertisements can be uploaded and then rated, shared and tagged just like amateur clips. This “encourages engagement and participation,” the company declares.
Do you think YouTube is a sustainable business? Any thoughts about their ideas on how to make money? I know that many of you are the prime consumers of YouTube, so would you look at ads in this way?

(Source: Newmark's Door)

6 comments:

Anonymous said...

In this ever changing market a person can make almost any idea into a moneymaker. YouTube is coming into this market and can't figure out how to make any money..the threat would be losing all of the support if they put in advertisments before the movies. i think its easier than that, all they need to do is put advertisments on the page. It wouldn't bother the users and it would be a simple way to make money. They could also feature advertisment movies and other sites on the homepage. YouTube will last but soon they need to make some changes
-Drew

Anonymous said...

I agree. I think a way to benefit from such a website is through the advertising. They also build a reputation and later on, if they find a way to better the site, they then can charge for these new features and since people have already found them so reliable or beneficial they are willing to pay this new set price but first YouTube has to build a good rep.
-Danielle

Anonymous said...

I agree that both Drew and Danielle have good points about how to make money, and yes I do agree that placing advertisements in the amatuer video sections and getting them rated before they go onto tv would be a great idea. I do not beleive that YouTube is quite a substantial business yet, but they are getting there because every company/ business goes through a trial/ error process in which they do not make to much of an income, but get to find out what their users/ consumers like and how they react to different ideas. I would react better towards the regular ads put into the sections with the amatuer videos because then it keeps the website true to what it is all about. If the YouTube personelle were to decide to devote whole pages to a certain company, then I think the users would take it in a wrong way, saying the website is changing for the money, almost making it fake. That website was made for amatuer videos, and with major ads for Paris Hilton's new album, that sense of genuine creativity towards making an amatuer video for the site will be lost.
-Ryan S

Anonymous said...

I agree with all three of the past three comments. Putting advertisments at the begining of movie clips would anger most youtube users. A possibility might be placing the ads at the end of movies, but a better alternative would be to put the ads directly onto the page. Also, I don't think that companies making their own "brand channels" is the best way to adveritise either. Video posts and comments have shown that many youtubers were not happy about Paris Hilton being on youtube. This type of advertising takes away from the whole concept of youtube. It's purpose is to provide a way for amateurs to get their videos out there. The participatory video ads are probably the most effective way of advertising on youtube. I know that people have uploaded some of the funnier ads, many of which have been banned from tv. So youtube could set up a way to recieve advertising money from videos like these. Also, companies could make video ads specific for youtube. These ads would have to be something a little different from your average tv ad, because unlike tv, people on youtube choose what they watch--ads aren't shoved in front of them. If companies made appealing ads, the videos would get watched and youtube could make some money. Youtube could also get a lot of advertising money from movie previews. Also, youtube could start charging a low price for their Director accounts (accounts that allow you to post longer videos). This would prevent the less serious youtubers from posting long videos and using more bandwidth. Youtube could also get a little more creative with their money making and could find some way for some of the youtube "stars" (lonelygirl15, littleloca, boh3m3--the kind of people who really want youtube to stay around) to help rasise money for the site. I think that the creators of youtube should turn to the youtube community for ideas on how to make money, because they are the ones who want it to stay around.
-Emily

max said...

let's not forget about some organizations or corporations interested in various statistics and data, so to speak.
some may know what i mean...

Anonymous said...

I agree with everyone here although i do feel like the advertisements could be charged for more and be put into better places much like the website ddictinggames.com is. They've put mandatory advertisement videos before all of their games. Also youtube has started paying some people with highly veiwed movies to continue to make them. This is proving very useful and I think that Youtube can only get better from here.
-Alex