According to recent reports, YouTube accounts for $3.5 billion of the nearly $58 billion in revenue at Google. Although short of previous estimates as high as $5.6 billion last December, it is quite impressive that YouTube is profitable at all, considering that it ran in the red for at least its first five years in existence. For the past two years, YouTube has been trying to increase the total watch time on the site to a billion hours per day. They haven’t quite made it yet, with only 6 billion hours of video being watched each month and they likely won’t hit that mark by their 2016 goal either. The recent appointment of Susan Wojciciki to CEO of YouTube could indicate a clear shift towards growing the revenue for the site instead of watch time as she was previously the head of Adsense/Adwords for Google.
Will Advertising Revenue Save YouTube Business Model?
The site will certainly continue to grow, but a shift in focus to advertising may be exactly what it needs to take it to the proverbial “next level” and keep the rising competition down. With YouTube unwilling to budge on its split with creators, they have painted themselves into a corner where only ad revenue will get them out. Video creators looking to make content for a living will need to go where the money is and if YouTube can’t raise revenues for creators, it may not be the destination it was once....... Hollywood could simply cut out the middle-man, much as they have with a recent deal including 14 YouTube creators. New Form Digital has signed production deals with those creators to make short films under 10 minutes. The venture is being called the New Form Incubator and will include creators like Joe Penna, Tony Valenzuela and Craig Benzine. It will be interesting to see if the content created through this venture has a heavily branded message or if the creators will be free to produce the type of content that got them to where they are today. Although revenues look solid for YouTube, revenue for many creators is down, partly due to the increased competition on the site and the constantly changing algorithm. Outlets like New Form Incubator are cutting into the ad revenue that is the basis for YouTube’s revenue. If YouTube can’t court the ad industry and find a way to increase revenue for creators, they could find themselves a training ground for video creators, rather than their final destination.