Thoughts on YouTube

YouTube Logo

Who doesn’t love YouTube?  Many people probably visit YouTube multiple times daily, whether it’s to watch some comedic videos to brighten their day, or perhaps to watch some news footage that was uploaded by a reliable news source.  YouTube, albeit being just over three years old, according to Alexa, is the fourth most visited website in the United States!  And even though Alexa doesn’t publish actual traffic numbers, in layman’s terms, YouTube is bringing in a ton of traffic.  That’s basically common knowledge at this point.  One would think that with YouTube’s recent acquisition by Google, and it’s high traffic numbers, it’d be doing really well for itself.  Unfortunately that’s not the case.

Let’s consider the most important and fundamental reason why people use YouTube – it’s free!  It’s absolutely free to both content providers, and content receivers.  Even though people consider Google as an endless money pit, running the fourth most popular website in the United States, isn’t cheap.  At this current moment in time, this is where YouTube is struggling.  It’s struggling to make money.  People will argue that 50 to 100 million dollars in revenue each year is quite a bit, which it is, but again, it’s the fourth most popular website in the nation.  Along with that statistic, one has to consider YouTube’s industry.  It’s streaming video!  So not only is it the fourth most popular site in the nation, but it also is the number one online video streamer.  Streaming video eats bandwidth, and bandwidth costs money; it’s that simple.

YouTube cofounder Steven Chen promised that live video streaming would be added to YouTube this year.  It’s new owner, Google, nixed the idea, due to cost.  In a Valleywag article today, it said:

YouTube execs estimated that if just 10 percent of the service’s users took advantage of live streaming, the company would have to add 20 to 25 percent to its huge server and bandwidth infrastructure to support it.

That’s ridiculous.  It’s almost guranteed that if YouTube added live streaming, more than 10% of the users would take advantage of the feature, which links back to the cost factor.  YouTube is already expensive to run, and advertisers aren’t that interested.

Advertisers are only interested in a small percentage of videos on YouTube, and the users of the site do not want to see ads.  YouTube currently employs two types of ads.  They have a rather large banner ad to the right of many videos, and more recently, they’ve begun adding pop-up advertisements embedded within the videos themselves.  Consumers, including myself, hate these, and many simply ignore them, or in the case of the pop-up ads, just close them without even reading or clicking them.  Sure, the companies paid to have the advertisements displayed, but most ad revenue services, including Google’s own AdSense service, works based on the number of clicks on an advertisement.  If people aren’t clicking, then the advertisers and the site displaying the ads, in this case, YouTube, aren’t making any money, and that’s a problem.  Not only are people not clicking, but the price per click on ads is usually very low to begin with.  Therefore, even if a few people are clicking on the ads, it’s simply not bringing in enough money.

YouTube is in a tight spot right now.  People expect it to work, and people expect new features and innovation from the company.  It’s hard to innovate, however, when the budget runs tight.  YouTube needs to find a way to make advertising on the site more appealing to not only consumers, but also to advertisers if it wants to survive.  I’ll even be so strong and say that if YouTube can’t find a way to make advertising more appealing soon, within five years, the site is going to start having serious financial problems.  Those problems could, unfortunately, lead to the end of YouTube.