In 2006, YouTube dominated the online video market with 46% of traffic. MySpace had 23%, while Google only had 10.25%. YouTube, a company that was created in 2005, it quickly became the most popular online video site with more than 100 million videos uploaded, watched, and shared per day. In addition, people watched video on YouTube 4 times more than on Google. Although Google had a name brand, had a bigger technical capability that supported multiple formats, and could better handle legal matters, it was not popular. Google was only above MSN and Yahoo video, while YouTube was the number 10 in the rank of online popularity, the third in the most popular video site category, and the number one video site. In addition, YouTube users watched
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YouTube’s premise was to offer the user a less disruptive watching experience. Thus, they inserted ads at the beginning of the videos and gave users the option to skip the ad with a simple click. Also, skin and overlays ads were inserted on the videos. At $20 CPM (cost per thousand views), ad revenues were still low in a business where competitors wanted a piece of the market. The revenue could be improved through YouTube’s number of streams, the revenue per specific ad, and pre-rolls. Advertisers liked the latter, since they could benefit from commercials they had already produced for television broadcasting. On the other hand, consumers didn’t like this format because they considered it intrusive. Nevertheless, once YouTube worked on legal and financial agreements with big networks such as NBC, Warner, Universal, and Sony, its revenues increased substantially. Google had set aside almost $200 million to support any legal conflicts emergent from YouTube’s activities. What it’s missing though in this equation is the revenue that other companies such as Hulu or Netflix charge their customers for watching content online. YouTube shouldn’t have to be different to them and should charge a monthly fee for a subscription. The problem with that approach is that, since the beginning, YouTube offered its services for free and if now they want to charge for it, their customers would not be happy at
YouTube’s premise was to offer the user a less disruptive watching experience. Thus, they inserted ads at the beginning of the videos and gave users the option to skip the ad with a simple click. Also, skin and overlays ads were inserted on the videos. At $20 CPM (cost per thousand views), ad revenues were still low in a business where competitors wanted a piece of the market. The revenue could be improved through YouTube’s number of streams, the revenue per specific ad, and pre-rolls. Advertisers liked the latter, since they could benefit from commercials they had already produced for television broadcasting. On the other hand, consumers didn’t like this format because they considered it intrusive. Nevertheless, once YouTube worked on legal and financial agreements with big networks such as NBC, Warner, Universal, and Sony, its revenues increased substantially. Google had set aside almost $200 million to support any legal conflicts emergent from YouTube’s activities. What it’s missing though in this equation is the revenue that other companies such as Hulu or Netflix charge their customers for watching content online. YouTube shouldn’t have to be different to them and should charge a monthly fee for a subscription. The problem with that approach is that, since the beginning, YouTube offered its services for free and if now they want to charge for it, their customers would not be happy at