YouTube’s Biz Blog Goes On Offensive, Says Industry Comments Are “Myths”

Yt While many, including me, have been asking for some time now when YouTube will show a profit and what their long-term business plan is, today, YouTube went on the offensive on their Biz Blog to "debunk the top five myths about YouTube". While one might think that Google is going to finally provide us with real data points on YouTube's business, the post doesn't provide enough details to truly debunk anything.

This is the first time I can remember that YouTube has gone on their blog to address topics being discussed about them in the industry and comes at an interesting time. In the past few weeks, we've seen more Google executives telling people in the media they are tired of analysts trying to figure out their costs and one has to wonder if this is the start of Google trying to fight back.

While the YouTube blog post ends by saying "These myths are officially busted", they didn't officially bust anything, at least not in my eyes. Without facts and numbers as compared to the rest of their business, the few data points they gave out don't provide enough details to debunk anything.

  • Myth 1: YouTube is limited to short-form user-generated content. Google says, "We have thousands of premium content partners, from Sony to Disney to Universal Music, and fans can find hundreds of full-length feature films and thousands of full-length TV episodes on YouTube."

We know Google has premium content partners, but first define what a "premium" partner is? How do we know you really have "thousands of them"? And while Google does point us to their movies page, of the 12 videos clips highlighted for me on the home page, seven of them are trailers and not full-length feature films. What percentage of full-length feature films and TV shows make up the total number of videos on YouTube? Clearly not even 1%. Now that would be fine if these premium content partners are making up the vast majority of your revenue, but Google gives us no indication of that.

  • Myth 2: YouTube videos are grainy and of poor quality. Google says, "It was only eight months ago that we launched HD videos on YouTube, and we already have more HD videos than any other video site. Hundreds of thousands of HD videos are uploaded to the site every month, and tens of millions are viewed every day. "

Granted, some of the poor video quality you see on YouTube is the way the video was shot and is not YouTube's fault. Yet, one of the metrics we use to judge "quality" in the industry is how long it takes the video to start up, something typically referred to as "frustration time" in the industry. For years now, YouTube's videos still take way too long to start up, have buffering problems for many and the delivery of the video has not improved since Google bought YouTube almost three years ago. Does it really matter how many HD videos YouTube has when the videos won't play back properly? Not to mention, YouTube launched their HD video offering nearly three years after content owners like ABC and others were already delivering HQ quality videos, with no frustration problems. Google refuses to address or answer any of the questions surrounding the poor video experience as a result of their video delivery.

  • Myth 3: Traffic, growth, and uploads are bad for YouTube's bottom line. Google says, "There's been a lot of speculation lately about how much it costs to run YouTube. The truth is that all our infrastructure is built from scratch, which means models that use standard industry pricing are too high when it comes to bandwidth and similar costs. We are at a point where growth is definitely good for our bottom line, not bad."

I would agree that no one truly knows YouTube's costs except for the company and everyone else is simply speculating, with some having more details than others. But you have to start somewhere and all of this speculation could end if Google was straight-forward with their numbers. I know that's not Google has done, but then the company has to expect people are going to try and figure it out and should not be "annoyed" when they see reports published. Also, growth may be good for YouTube's bottom line, but it wouldn't be if they were not owned by Google. So lets take that into consideration along with the fact that companies says things are "good" all the time, only for us to find out later they really weren't.

  • Myth 4: Advertisers are afraid of YouTube. Google says, "Over 70% of Ad Age Top 100 marketers ran campaigns on YouTube in 2008. They're buying our home page, Promoted Videos, overlays, and in-stream ads."

I don't doubt this data, but without revenue numbers it's meaningless. What percentage of all of those advertisers, and the revenue from them, comes from ad banners on the YouTube website? Nothing wrong with that, but we're waiting for YouTube to figure out how they are going to monetize the video, not simply the traffic to the page where they deliver banner ads. Break out the numbers for us. Even if you don't want to break out the revenue, show us what percentage are doing in-page, in-stream, overlays, banners etc….

  • Myth 5: YouTube is only monetizing 3-5% of the site. Google says, "This oft-cited statistic is old and wrong, and continues to raise much speculation. In our view, the percentage is far less important than the total number of monetized views, and we are now helping partners generate revenue from hundreds of millions of video views in the U.S. every week (and billions worldwide), more than any other video site has total views. Monetized views have more than tripled in the past year, as we're adding partner content very quickly and doing a better job of promoting their videos across the site."

Once again, we don't have any actual data from YouTube to prove their point, we just have to take their word for it. They do say the 3-5% number is old and wrong, but don't share with us what the accurate number actually is. I would agree with YouTube that the number of monetized views is what's most important, but you also have to take the volume of monetized views into account as well. Monetization only works, as a business model, if the volume of videos your get revenue from is large enough to support your business. Also, when they say something has "more than tripled' that really means nothing to us without numbers. It sounds good, but what's the base number they were working off of that actually tripled?

I like seeing Google going on the offensive, but unfortunately this post by YouTube didn't answer any of the so called "myths" in the industry. Are they myths? Could be, but until YouTube proves it to us, with actual numbers, no one is truly going to know.

Related Posts:

We Should Care About YouTube's Core Business, Not Their Market Share

Google Says YouTube Won't Lose $500M This Year, I Say Prove It

YouTube's Problem Is Not Advertising, Its Getting The Videos To Play

Two Year's Later, Google Still Can't Deliver YouTube Without Stuttering & Buffering

Google's New Business Video Offering Not A True Enterprise Product

YouTube's Live Event As Overhyped As The Company

  • Interesting post.
    I don’t think it’s fair to say that ‘the videos won’t play back properly’. If that was the case then YouTube would be dead in the water. The user experience must be up to scratch and they have the sustained traffic to prove it.

  • Hi Stefan, what have they proven? That lots of traffic equals a good “user experience”. We all know that not to be true. You have to take your Flash hat off for a second and think about the experience. If FOX, Hulu, ABC, CNN or any other major site routinely had videos take 30 seconds to buffer, you would not be calling that a good “user experience” whether they use Flash, Silverlight or any other platform.
    This is not about the platform itself, but rather how YouTube happens to be using that platform and not providing a good quality experience that the platform IS capable of delivering. Other content owners are doing it, why can’t YouTube?

  • What is not a myth is that YouTube videos are still stuterring. I’ve never seen such a bad QoS. Dailymotion, Vimeo and all the competitor have a smooth delivery. What a shame!

  • Kevin

    The low quality of Youtube video’s and the stuttering problems are a testament to the quality of the CDN’s in my opinion.
    Google has spend years and tons of money building out their delivery network yet it still sucks.
    My ISP (a small ISP you never heard of) has direct peering with Google, Akamai, and Limelight Networks all off of the same exact router and all three of them have physical facilities within a few miles of that router.
    Youtube stutters and has problems constantly while Video from either Akamai or Limelight is ALWAYS flawless. The only variable is google, the traffic to and from those 3 providers leaves our network through the same piece of physical equipment (the router) and is handed directly to their networks.

  • Kevin

    I thought I’d also add to my earlier post that direct peering with Microsoft takes place at that same exact router. The performance from Microsoft is almost on par with Akamai and Limelight (not as good but close) and Google’s/Youtube’s is a distant 4th.
    I also know that it is not a congestion issue between us and google. The pipes to google have recently been upgraded (added a couple more GigE’s) and they average about 10% utilization and peak at about 20% utilization.

  • What Google is NOT doing, is letting me monetize my videos, just cause I am a Danish resident. They only allow for monetization of videos uploaded by citizen of the G8 countries.
    Why doesn’t Google provide a “Buy it now” link for relevant videos?
    Youtube is the biggest usage of bandwidth for the whole Internet. You can’t expect them to provide perfect bandwidth for every user all the time. The quality of the bandwidth is also up to the ISP at the end of the connection. Some ISPs may be blocking Youtube bandwidth more or less using anti Net Neutrality tactics.

  • Gregor

    The single most important line in the whole blog post is “We are at a point where growth is definitely good for our bottom line, not bad.” Unless anyone is willing to assume this might be a lie–and in which case anything stated by a company might be assumed to be a lie–then the bottom line is black not red. This should simply make all the other cost analyses irrelevant.
    It is very possible that YouTube is profitable because it leverages the existing infrastructure at Google, but that is as it should be. When a company has a fixed cost component in their business they should seek to capitalize upon it as much as possible and the only thing that matters is whether the marginal cost of the new product (YouTube) is less than the marginal revenue produced by it. This is BTW how Google made their AdSense business profitable (it leveraged the fixed cost infrastructure of the AdWords business). This is ultimately led Overture to be acquired by Yahoo since it was no longer possible to make a decent business simply serving ads on other sites (they needed their own properties on which they could capture 100% of the revenue).
    Consider that long term an analogous situation might evolve with Akamai and Limelight becoming the Overture’s of CDN’s, if Google would look to open up its CDN as an ancillary service just as was the case with AdSense when it followed AdWords. And as was the case with AdSense when revenue shares with customers were dramatically improved for customers, so too might the economics of the CDN business really be turned upside down if Google started to offer a CDN service that was much cheaper than the alternatives (but above their cost). And this makes sense in light of their AppEngine initiative, over time (just as Amazon.com has included a CDN service for the AWS).

  • Richard

    youtube.com/movies does indeed have films, which is nice, but I’m in Canada and each one I tried “does not work in my country for copyright reasons”.
    so why do they even show them to me as choices? it’s not like they don’t know I’m in Canada until I actually click on them.

  • Roger Matthias

    You have to wonder if the statements on the YTblog post, will be enough for investor sentiment. For YT to actually comment on the monetization speculation say’s a lot.
    The recent increased upload GB and the toying with 3D by YT, leaves one thinking is this a show of posture or fear.

  • Gregor,
    One could also interpret that statement to mean that the bottom line is less red, but not yet black.
    And it could remain red for the foreseeable future could it not? As Dan pointed out, it’s impossible to tell without supporting data. Chris and Aaron have done absolutely nothing at all to disprove the speculation. I wonder why they bothered to comment at all.

  • Gregor

    Josephmartins,
    I’m not sure the statement: “We are at a point where growth is definitely good for our bottom line, not bad” could be construed as less unprofitable. To get really analytical about think about the phrase “definitely good for our bottom line”. If it is a backhanded way of saying its less unprofitable that would be egregious, but I really can’t see how it might be read that way. Growth of any money losing venture simply can’t be good for the bottom line.
    BTW Dan has said the following: “YouTube can’t be profitable, not this year, not next year, not three years from now. It has no business model, but not for lack of trying. YouTube is the quintessential example that dispels the notion in this industry that all you need is lots of eyeballs to have a profitable, sustainable business model. ”
    Now this is simply glossed over, stating “Also, growth may be good for YouTube’s bottom line, but it wouldn’t be if they were not owned by Google.” ???? Convenient amnesia?

  • Dan – great responses. I couldn’t resist blogging about this as a certain image came to mind 🙂
    http://weareorganizedchaos.com/index.php/2009/07/22/dan-rayburn-vs-youtube-round-1/
    Matt

  • This is really great info thank you, this is just what I need

  • As for me I don’t surf in YouTube a lot. Only if someone send me a link…