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Fact: I have no idea if what I am about to write is confidential. I'm sure it’s not. But I will say this: some of it is obvious. Most of it is biased. It’s a slanted view of things from my vantage point.

Which vantage point is that? A blogger’s. A producer of video content. Also, a developer of search products, including both text-based and video-based content. All right, do we have all of the disclosures out of the way? Oh, no, that’s right, I’m a Yahoo! (NASDAQ:YHOO) shareholder, I don’t know any Google (NASDAQ:GOOG) stock.

With that being said, let me dive into the matter at hand.

I have written in the past about my suspicions that Google will not torpedo Google Video [GV] for the sake of YouTube [YT], but that Google will most probably tweak how it uses GV relative to YT in the future. Because YT and GV are both distribution partners of ours, I will not totally shatter the bond of trust that exists between business development partners and tell you what the plan will actually be (as tempting as it is), but I will write the following as a blogger who covers the space.

First, some background.

In that post, I outlined how Google might use GV as a platform for monetized video and leave YT as the free entertainment platform. It turns out, I was half right. The half that is right is the latter. How Google will use the latter is not what I thought (monetized video content). I won’t - out of respect, courtesy and common sense - fully divulge what the strategy will be because I do not think it is public yet. If I were a journalist in the strict, traditional sense, I would outline it. But since I am privy to that information by virtue of being a “business development” partner, I don’t think I should outline that here. But I will give you, HipMojo.com’s faithful readers, reason to read on.

I’ve already mentioned how Google - a firm that makes 99.9% of its revenue from search ads - will make money on display banners ads.

It just so happens that so long as Google’s YT is a haven for user generated content, the revenue Google can wring out of the site will come as a result of banner ads. Of course, the real money will come from video ads. We’ve seen estimates of video advertising on the Web surge rapidly throughout 2006.

The point is: video advertising is going to be big, so they say. But the fact is that video advertising as it is now is a myth, a mirage, a myopic maybe. For video advertising to “actualize,” as ad people say, the leaders in the space need to get their act together.

The leaders in the space, in this context, are

a) the creators of video content
b) the advertisers of video mediums
c) the platforms that help aggregate and distribute video content.

Video: Not Currently Advertising-Friendly
Right now, there is little desire to advertise alongside video content because most of the video found online, consumed online, and promoted alongside online is user-generated, or user-appropriated content. In other words, it’s either high quality video content produced for TV that happens to be ripped off and added online with no real right to do so… or it's America’s Funniest Videos-style video content has no place alongside marquee, top-tier advertising.

The challenge, for the platforms that help aggregate and distribute video content is that they cannot monetize the high quality content (due to copyright issues) nor the low quality content (due to quality and dubious-factor).

In other words, the challenge lies in being able to bridge the gap between the two: in other words, the “torso content.”

That is not my term. It’s the term coined (or “appropriated”) by the platforms that help aggregate and distribute video content. The problem is that traditional media companies might be rushing to produce videos but many might be better off not doing so.

As such, the goal - one would think - is to get “torso” companies to produce video for the web and put it on large platforms that help aggregate and distribute video content to get advertisers to test the media. Sadly, the platforms that help aggregate and distribute video content are dropping the ball, or realizing that they don't need to do that.

How come?

Why Video Might Never Be Fully Monetized

Online advertising as a whole these days is a $15B market. Search is a $5B market. Display ads another $5B. But video ads in 2006 were a paltry $500M. In other words, so long as the platforms that help aggregate and distribute video content are independent from the benefactors of search and display ads do not need to really crank it up with video ads.

But now that the platforms that help aggregate and distribute video content are Google/YouTube, and Google already generated billions from search (and Yahoo! generates billions from display ads), said companies simply lack the incentive to “make it happen” (ie monetize) video content.

This in itself is not problematic. Where things dicey is that low quality video content will never (I know, never say never, but I’m saying it) gain advertising dollars. And high quality video content will never fully be online in the next few years.

But unless “torso” content has an incentive to get online and put content on the platforms that help aggregate and distribute video content, video advertising will never take off because the platforms that help aggregate and distribute video content are now Google/YouTube. And since there is so much content already on, and because there are so many viewers there already, there is simply no reason for platforms that help aggregate and distribute video content to incentivize the “torso” content creators to put their content on the platforms that help aggregate and distribute video content.

At WatchMojo.com, we put a lot of our content on Google Video, YouTube, and whatnot… but as time goes by, there is no need to put all of our content on those sites… we can put 5% of it on those sites for marketing purposes and leave the 95% on our site…

Of course, on our site, we might not have enough unique users, pageviews and streams to engage major advertisers, meaning that the big boys won’t test advertising on our site.

As you can see, the cycle continues and major advertisers won’t be drawn to test video advertising.

Then again, we did outline how Google could do this here.

What exacerbates the matter, really, is that the YouTube sold and cashed out. They made money.

Google, which owns YouTube, makes plenty of money as is so they won’t take any risks to make more money in videos if it means risking anything.

So as the cycle continues, high quality producers balk at moving online; low quality producers won’t help video content monetization; and “torso” producers are discouraged from helping platforms that help aggregate and distribute video content actually make a dent in the growth of video advertising.

Source: Google/YouTube Strategy Highlights Why Video Advertising Might Falter