Even with a billion viewers, YouTube still isn’t profitable. Last year YouTube’s revenue grew to a massive $4 billion, up from $3 billion a year earlier. But after paying for content and investing in technology, YouTube barely broke even.
The pressure is on to become profitable.
Both Facebook and Twitter which currently send a lot of traffic to YouTube are beefing up their video platforms & this could reduce traffic to YouTube. Furthermore Facebook, and startups such as Vessel, are trying to poach YouTube stars. Meanwhile, Amazon and Netflix are changing the image of “online video” by licensing Hollywood-produced content and creating original programming in contrast to much of the low quality consumer generated content on YouTube.
Last year, for the first time, Facebook surpassed YouTube in overall video views. Further bad news for YouTube was a survey released last week indicating that more advertisers will use Facebook video for their ad campaigns than YouTube this year. According to the survey published by Mixpo, 87% of respondents said they planned running video ads on Facebook, compared with 81.5 % on YouTube.
YouTube isn’t sitting on its hands with these challenges. Its response includes a music subscription service similar to Spotify that was unveiled in Nov & provides ad-free music for $10 per month. Last week YouTube confirmed it will be expanding the subscription service to include premium video content. The service will allow subscribers to store videos offline on mobile devices and view premium content behind a paywall only accessible to premium subscribers. Content creators will get a share of subscription revenues, as they do with advertising revenues currently.
If those services succeed they will provide a steady revenue stream that could help support investments in higher-quality programming to compete with the likes of Netflix and Amazon.
Why should you care?
Clearly YouTube has a challenging year ahead of it to both attract and retain viewers, content creators, & advertisers.
The stakes are high. Video is the fastest growing form of digital advertising, & forecast to account for 80-90% of global consumer Internet traffic by 2018. Social networks are now competing with premium publishers and consumer generated video sites like YouTube to be the leading source of video consumption on the web.
If you’re not doing so already, video is a channel you should be seriously considering in your advertising plans – in particular Facebook and YouTube.
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Jeremy and Mark are two of the partners behind SureFire Search. Despite their deceptively youthful appearances, both have worked in search marketing for many years. To put that in context, Google didn't even exist when Jeremy started.