Possible Revenue Models for YouTube

YouTube’s revenue models were limited by its strategy that focused on short, low quality, user-generated videos. Due to such a focus, the revenue model for You Tube was mainly limited to the serving of targeted advertisement to users of the site. In an advertisement-based model, the entity places advertisements alongside or embedded in the videos uploaded, while allowing the users to access the content of the video without paying for such access (IDC 4). Such a model is informed on the successful implementation of a similar concept in search engine companies where users get access to content without payment, while advertisers reach the audience of such search engines by paying their advertisements to appear in pages that bear content relevant to their businesses.

Unlike search-engine based ad targeting, YouTube’s generation of revenue via targeted ads was challenged by factors on the advertisers and consumers sides. On the advertisers side, the placing of advertisements on videos that bear the logos of those who upload the videos may prove unattractive since such logos could deter the visibility of their advertisements (Cool, Seitz and Mestrits 3). Secondly, since You Tube focused on UGC, and users could upload content that they did not own, advertisers could feel dissuaded to have their advertisements appear on or alongside stolen content (Gartner 1). Such limitations on the side of advertisers implied that YouTube strategy would involve making advertisers content more visible and/or filtering out copyrighted material, aspects that conflict with consumer perspectives, “anything goes”, that led to the prominence of YouTube (Cool, Seitz and Mestrits 3).

On the users side, placement of advertisements is challenged by users disfavor for interruption of their experience by advertisements. For instance, in a ClipBlast study cited in the case, almost a third of those surveyed indicated their dislike for online videos served with too many advertisements (11). To alleviate this challenge, YouTube would need to evaluate optimal ad-placement locations that do not disrupt user experience greatly, while allowing visibility to lure advertisers to subscribe to such advertisements. This was, for instance, for instance the concern that YouTube tried to alleviate by ensuring that ads only appeared after the video had played for a given period and that ads were served in a not-too-intrusive format as the “prerolls” that were common in television advertisements (Cool, Seitz and Mestrits 11-12).

Additionally, due to its predominant low quality content, YouTube faced a challenge of attracting clients who prefer high quality content, who could, for instance, form a basis on which the entity can diversify its revenue generation strategy to include a pay-for-content model (IDC 4). Such arises since the users seeking such content have to wade through enormous-low quality content to get the high definition content that they seek (Cool, Seitz and Mestrits 11). Arising from such a market need, YouTube could evaluate a pay-for model that only serves premium content, where users can pay for content on a pay-per-access mode or a subsidized subscription-fee model.

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