YouTube is about to explore revenue-sharing with users. On the surface, it looks like user empowerment and increased revenue. Will it be a win-win situation? I think not.
Although it’s only natural that YouTube will start exploring more monetization options after the $1.65 billion acquisition, the move could easily backfire and open up the road for upstart competitors to make inroads into the market and send them to hell in a handbasket.
The incentives are all wrong. Ever since the Google acquisition, YouTube’s strategy has shifted dramatically from empowering the user to partnerships with big media. It’s a logical progression of events for Google to protect its large investment, we are also starting to see YouTube become a collection of media outlet teasers rather than an user-powered remix of digital video content.
In a sense, the shifting of policy to become more like a member of the traditional media is inevitable if they want to license content from movie companies and television productions as well as avoid frequent lawsuits, it is also diminishing the incentive for users to submit original content or even copyrighted snippets (which can only make media companies happier).
On the surface, sharing revenues will give users an incentive to submit more original content. However, if done wrong it can kill the community around YouTube and put them on the same level as Google Video. Here’s why I think a revenue-sharing policy on YouTube will backfire.
All the wrong incentives
Sharing revenue with users in itself is not a bad thing. However, to share revenue means you need to show more ads on YouTube. It’s no secret that the products best suited for affiliate marketing are over-priced goods with a large margin. YouTube is famous for its sparcity of ads and simple design.
Sharing revenue will involve adding more advertisements to the layout or embedding ads into the video. This will be a controversial move that is bound to offend a large segment of long-time users and endanger the community that they fostered since day 1.
The fact that there is still a lot of illegal copyrighted content being submitted to YouTube raises another issue. What happens to ad revenue generated by illegal content? Do you give it to the copyright holder and not the user who submitted it? Or do you absorb all the profits yourself? The more popular a piece of content the more difficult the issue will become. Obviously, the copyright holder will not agree to even pay a small cut to the submitter as an “agent” but the submitter will naturally feel they are entitled to some credit.
Users will probably start shying away from submitting copyright content. Although this could be good for copyright holders, viewership will inevitably decline if YouTube’s offerings completely consists of big media samplers and amateur productions. User-edited copyrighted content currently provide a bridge between two extremes and also helps keep a pulse on pop culture.
They don’t need the money
The biggest problem I see with this set up is the fact that YouTube doesn’t need the money. They have never tried to optimize their monetization as a startup and now that they are a division of a search engine giant like Google, it will be harder for them to truly focus on generating revenue.
It would be better to grow traffic and continue improving the system until Google develops adequate technology to optimize contextual ads to video content rather than embark on a suboptimal monetization or revenue-sharing scheme.
At the End of the Day It’s the Community
Community is probably the singlemost greatest asset to YouTube right now, especially since they became a part of Google. It is an asset that no large corporation can buy because it is a mixture of being at the right place at the right time and having all the right elements (sharing features, social networking, etc.).
I know that if they start serving ads within videos many bloggers will start refraining from using YouTube unless they get a cut. Right now there is an abundance of startups gunning at YouTubes audience.
In conclusion, now with the involvement of big media as partners an revenue-sharing that ends up benefitting big media than the average user is bound to backfire. There are many complex issues that need to be addressed for it to work. Whether this will be more worthwhile for them to do than grow the foundation that they have is anybody’s guess.
“We are getting an audience large enough where we have an opportunity to support creativity, to foster creativity through sharing revenue with our users,” Hurley said at the World Economic Forum. “So in the coming months, we are going to be opening that up.” Hurley gave no details of how much users would be paid, or what mechanism would be used.