YouTube Turns Five Years Old, But Without Google, It Would Be Bankrupt

Anyone who has read my blog before knows that I think YouTube gets way too much credit in the industry that they don't deserve. While I don't disagree that YouTube deserves credit for creating a platform that has allowed any regular Joe to upload and share video at no cost to the individual, that's all YouTube has done. Sure, that platform has had a big impact on the lives of a lot of people, but each time YouTube has a birthday, or delivers another billion streams, Chad Hurley wants to try to convince us of why YouTube should get all the credit, for everything in the industry.

In his latest post on YouTube's blog, talking about YouTube's fifth birthday, Chad makes all kinds of references to YouTube's "innovation", "experience" and how they provide the "revenue models", "tools" and just about anything else a content owner needs to succeed. The problem with this thinking is that YouTube didn't contribute to the technology of the industry at all. They haven't created any codecs, new delivery protocols, created any industry standards or even lead the pack by adding new functionality. While Chad talks about all of YouTube's "innovation" lets not forget that they don't even support streaming, don't support live, only recently starting supporting HD, have a cap on the size of file that can be uploaded and have plenty of other limitations of their service. Show me one feature of YouTube that they lead the market with or is something the rest of the industry has adopted.

And do I even need to mention how YouTube's platform was essentially allowing others to steal content and re-broadcast it on the web without any kind of control? For all the talk of YouTube's "innovation", how is it that it took a lawsuit for them to actually do something to address the issue? Shouldn't they have seen that coming? And what about Chad's assertion that YouTube's goal is, "To set the standard in online video delivery"? We all know they aren't doing that. No one thinks of YouTube for the quality of their videos, they think of the platform as a free and easy way to get content online and that's the problem.

As the industry debates when YouTube will become profitable, one thing needs to be kept in perspective. Without YouTube being sold to Google, it would be out of business. The only reason YouTube is even around in the market to have the chance to turn a profit is because Google has deep pockets and is willing to lose a lot of money on a long-term bet. But YouTube is not the one making that possible, Google is. So if anyone really deserves the credit, it's Google for allowing YouTube to burn some of their cash and giving them a shot. Google is giving YouTube the time to be successful and if and when it turns a profit, it will be as a result of Google's cash and not because of YouTube's "innovation". As an industry, why do so many people continue to heap praise on companies that can't turn a profit, let alone after five years?

I don't know what the percentage is, but the overwhelming number of content owners on YouTube will NEVER make money. YouTube delivers over a billion videos a day but only monetizes a billion videos a week. That means they are only generating revenue from about 14% of all the content streamed on the site. While that number, or one close to it, might be enough for them to make money, it clearly goes to show that the average content owner on YouTube will never see a dime. And to me, that's ok. YouTube was started as a simple way for people to share videos and that's it. The problem is that Chad says that, "Five years into it, we're as committed as ever to the core beliefs and principles that guided YouTube's creation." But that's not the case anymore since the company has had to try every business model in the book to try and survive and make money. Remember YouTube for the enterprise? 

Three years ago, in an article on Forbes, Chad once again sang YouTube's praises and told us how YouTube was going to allow all this new talent to be discovered via the web and make everyone a lot of money. Clearly that has not happened. While many are quick to point out that YouTube still dominates Hulu in terms of traffic numbers, Hulu is monetizing almost 100% of their content. So would you rather have less traffic that is all monetizable or lots of traffic that you can't make any money from? Why does YouTube get so much credit just because they have a lot of eyeballs? Back in 1999 and 2000 the portal space was all about eyeballs. The value and stock price of, and many others were all based on how many eyeballs they had. How well that that work out for them when it came time to actually being able to generate revenue from those eyeballs?

YouTube is no different than many other sites like Veoh except for the fact that YouTube is still around only because they are owned by Google. Without that, YouTube would not exist in the market. They could not afford to. I have no problem with YouTube getting the credit for what they have done, but they get far too much credit for what they haven't done and for technology that they have not developed, created or lead the market with. Think I'm wrong? I'd love to see in the comments section what "innovations" you think YouTube has brought to the market.

Related YouTube Posts:

Why Can't YouTube's Player Auto-Detect When A User Should Get HD Quality?

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

YouTube Launches "Video Speed Dashboard", But The Results Don't Tell You Anything

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

YouTube's Bandwidth Bill Is NOT Zero, I Expect More From A Story

YouTube's Live Event As Overhyped As The Company

  • Dan,
    Great post. I couldn’t agree more with your core assumption that YouTube wouldn’t exist without Google and hasn’t done noteworthy things from a video perspective. The two main things they’ve led the industry in have not been at all related to the actual technology or delivery of video–scale and search. With the immense scale and international reach YouTube has, comes a wealth of knowledge about user behavior and trends that I guarantee no other video company has been able to produce. While it doesn’t deserve all the credit for facilitating its scale, the scope of its operation and the amount of video delivery certainly has required some innovation. Its position as the #2 search engine is also incredibly valuable to Google’s core business, which is why no one at Google complains too loudly about YouTube’s inability to profit off of video alone. Excellent points about the lackluster innovation, however.

  • Hey Pete, I don’t disagree with you, but then shouldn’t we be giving Google the credit? They are the search engine, not YouTube. As for scale, I think a company should only get credit for scale when it does not impact the user experience in a negative way. They don’t deserve any credit for scaling a video quality that is so poor compared to just about everyone else in the industry. And even if they did deserve the credit for that, again, it would have to go to Google, not YouTube.

  • Rob Green

    Great post Dan. The one destructive thing Google’s done is allow the promotional-non-revenue based distribution model to persist longer then it should be.
    Clearly companies like Hulu are making progress in monetizing content and the sooner more companies are doing this the better.

  • Rob brings up a good point.
    While YouTube/Google cannot be faulted for it, the use of video in a promotional/non-revenue context at such massive volumes has done a fair bit of damage in creating a consumer perception that video on the web should always be free.
    In tandem with the fact that ad networks are something of a joke in terms of monetization potential, for small to mid-sized businesses producing quality content, this has actually stifled the business of online video to a great extent.
    To be fair, neither have YouTube alternatives provided the leadership necessary for content owners to build viable business models with video on the web. I think there is plenty of room for innovation there, in helping create earning potential, without solely relying on driving eyeballs.

  • Dennis Lundin

    Please talk a look at my website and tell me if you think the encoding is so bad. I don’t think any more it is the encoding at YouTube, but more the user uploading a compressed file. I have uploaded all the video as AVI uncompressed and got great output. Personally I have tested and tested some many video platforms and encoding options and the only way so-fare to get a good video online, is by using AVI uncompressed as input. For my corporate clients I am using Sorenson Squeeze 6 and upload to Bits On The Run using “PassthroughFLV”.

  • Mike

    YouTube had built a great system, the problem is the support for Partners is poor, and they have no way of identifying quality producers to help make them successful. If you don’t somehow manage to reach critical mass on your own, you’re lost in the crowd.
    Unfortunately, quality doesn’t bubble to the top on YouTube. Stolen property and getting hit in the nuts is what is what makes it organically.
    YouTube needs to identify quality producers with marketable content, even though they might be getting just 1000 views per video. If they could bubble that to the top rather than whoever is making trouble or has a half naked women on their thumbnail, their platform would become highly attractive for advertisers.
    In the end, Google’s ability to provide human support is its downfall. Not everything can be handled with an algorithm and be user-supported.

  • Mike Izquierdo

    Dan, great post. Take a look at what’s happening to Facebook right now. They’re trying to monetize it by charging a monthly subscription fee. Now many of their “Customers” are revolting because they think it should be free. So what’s the real value of Facebook then if there aren’t enough paying customers for them to make a living?
    One has to understand what it means for a product to have “Value.” If you can’t make a business from a service or product that means you really haven’t satisfied a market’s need for enough Customers to pay for it. So it therefore has very little Value.
    I could be wrong, but it seems to me that sites like Facebook, Twitter, YouTube etc. have very little inherent Value. People can live without it. Personally, I’m not interested that my friend is currently sitting in his kitchen eating a sandwich.

  • Hi Dennis, all of the videos I looked at on your site have almost no movement at all in them. They are talking heads that barely move, so they are not really the best type of videos to judge encoding quality. I will say though that many of the videos I saw had audio sync problems, so there is some kind of encoding issue with some of them.

  • There is nothing wrong with a long term big bet. YouTube dwarfs every other video medium, in terms of viewership, by orders of magnitude.
    You should be blaming Google for not whipping YouTube into shape and turning it into a profitable business… don’t blame Chad Hurley- he has nothing to do with YouTube- its all Sergey and Larry’s attention to it that is to blame at this point.

  • You fail to see well orchestrated piracy as “innovation”. Look at the history of the largest concentrations of capital and you will see a history of piracy, monopolies and mass robbery.
    From Microsoft pirating the apple gui, to Disney re-appropriated cultural folklore to rail-road monopolies etc.
    To paraphrase Honoré de Balzac’s tragicomic novel “Le Père Goriot”. “The secret of a great success for which you cannot explain is a crime that has never been found out, because it was properly executed.”
    In this case your aware of a small part of the crime but fail to recognize the larger crime that is being properly executed.
    I really don’t see the point of criticizing youtube on the “innovation” level. Goggle is not in the game for the short run. In the past new platforms were government subsidized and regulated monopolies, today the platforms of tomorrow are very loosely regulated and directly subsidized by the large corporations. Whether Google make a profit in the short term is irrelevant, and its clear the “public” interest is of slightly less concern to corporations than ostensibly public regulatory institutions.
    Google is setting the stage for controlling the future of global video distribution across all channels of communication. They are not concerned about a bleeding a few hundred million here or there. If they ~nearly~ kill pay-for-content industry in the process it will just given them a stronger position in the advertise for content platform they are building.
    Obviously this is not just happening via youtube .You are aware you can download any pay-for-content commercial film today by adding the word “torrent” after the film title in your Google search?

  • magnusdopus

    Top things that Youtube did right :
    Brand – something about youtube that is just very catchy
    UI – very clean. Chad Hurley did an amazing job here.
    Technology choices – embraced Flash, video distribution was one of the fastest. They are one of very few startups that could handle massive traffic right from the start.
    Venture capital raising – they were backed by Sequoia which led to consistent financing and ultimately acquisition by Google.
    Playing dirty – ultimately youtube’s biggest move was showing ‘Lazy Sunday’ (SNL skit) and other pirated content. I suspect that they had a crew finding viral videos, converting them, and then posting to YT.

  • boris

    Yeah, and without my job I couldn’t pay my rent. This post misses the simple point that users like YouTube.
    We can speculate until the cows come home about the value of new revenue models, technologies, content applications etc. The point is that for most people YouTube is online video, mostly for the reasons posted by magnusdopus.
    People are used to a broadcast culture which is basically free and ad-supported, and while broadcast companies chewed their fingernails about how it could be funded YouTube just went out and did it and bet that the $$ would work out. And they have. The bitching sounds like sour grapes to me.

  • roymond

    “The overwhelming number of content owners on YouTube will NEVER make money.” The overwhelming number of content owners on YouTube never meant to make money from their home-made, amatuer content.
    “Hulu is monetizing almost 100% of their content.” 100% of Hulu’s content owners expect to generate revenue from their professionally produced content.
    How can you compare these two services in that way?

  • This is very true. Youtube consumes a crazy amount of data and bandwidth, but it is yet to generate a profit.

  • We can speculate until the cows come home about the value of new revenue models, technologies, content applications etc. The point is that for most people YouTube is online video, mostly for the reasons posted by magnusdopus.

  • ba

    You have strong points here. Indeed, YouTube is like any other video sharing/streaming site. However, Google is a search engine. It would be odd to give credit to them. So the credit goes to YouTube since its the video sharing site.