Web 2.0’s parlor game is to guess “who will buy YouTube?” YouTube may be the coolest destination on the Web, but fame does not equal fortune, especially in our disposable, “15 minutes of fame” society.
So I prefer the “Why NOT to Buy YouTube” game.
Highlighted below are five reasons NOT to buy YouTube.
YouTube’s recent announcement that it now serves 100 million videos daily at its site was greeted with wide acclaim. YouTube has also been the star of tech and media conference circuits, taking center stage at both the Allen & Co. Conference and the Always On Summit.
YouTube is now boasting a ‘rumored’ $1 billion valuation. The buzz is so intense, it is almost as if the company reported $100 million in profits, or even $100 million in revenues, not ‘just’ 100 million in video views.
Chad Hurley, YouTube CEO and co-founder, acknowledged, however, such is definitely not the case during his panel appearance at the AlwaysOn Stanford Summit; Hurley reluctantly confirmed YouTube is not profitable.
1) Free-to-the-consumer YouTube has $1 million monthly estimated bandwidth costs, but no meaningful revenue stream.
We are not trying to stream full-length programming…The site specializes in short—typically 2-minute—homemade, comic videos…
YouTube, in fact, restricts the length of video uploads:
How long can my video be? Most videos on YouTube are under five minutes long…longer videos require more compression to fit in the 100MB size limit, and the quality will go down as the length of the video goes up.
How long will my video take to upload? Depending on your connection speed and the size of the video, it can take anywhere from a few minutes to several hours to upload a video.
Is there a limit to how much I can upload? 100MB and 10 minutes in length per video.
2) YouTube solicits low production quality, “home-grown” user created content lacking mainstream appeal of professionally produced video entertainment.
The news is not all good for YouTube…L.A. News service sues YouTube over riot video, seeking $150,000 for infringed works and a court order prohibiting YouTube from allowing its work to be uploaded and broadcast on the site…
YouTube regularly receives demands for removal of unauthorized copyright video from professional content owners; YouTube reportedly removes unauthorized content it is notified of, but does not seem to proactively police YouTube to screen for and remove copyright content uploaded in violation of the Digital Millennium Copyright Act.
3) YouTube is a magnet for the uploading and hosting of pirated video content.
Hurley: We're going to sell sponsorships and direct advertisements. But we are building a community, and we don't want to bombard people with advertising.
Chen: If we wanted to, we could instantly turn this into $10 million in revenue per month by running pre-rolls [short video ads] on the videos. But at the same time, we're going to make sure that whatever revenue model we've built is going to be something that's accepted by the users.
I also note how YouTube non-paying users (and other popular Web 2.0 free-to-the-consumer properties) seem to be catered to almost more than paying audiences are catered to:
MySpace ‘friends, Digg ‘diggers’ and You Tube ‘broadcasters’ not only receive free Internet services such as Web page and video hosting, but the owners of the services, which are provided free-of-charge to the public, are bending over backwards to prevent very non Web 2.0 advertising from ‘interfering’ with the non-paying users' Web 2.0 experiences.
4) YouTube users are not willing to pay for content and are deemed resistant to advertising.
All of the Web 2.0 Social Web properties which rely on users to contribute content are faced with the ‘Social Freeloaders’ phenomenon.
As in the ‘real-world,’ interactions within social communities on the Web are dominated by an extremely small, self-selected minority of active, vocal participants.
Currently YouTube is reporting a video upload to video view ratio of one-tenth of one percent. YouTube says it is ‘empowering’ users to ‘become the broadcasters of tomorrow.’ YouTube’s sustainability, however, is dependent upon generating a higher ratio of user broadcasters contributing today.
5) YouTube’s “Broadcast Yourself” positioning is not sustainable.