Economics of sharing platforms |
Youtube, the main video-exchange platform, evolves in the Web 2.0 world. But what is exactly this notion? In fact, there is no single definition but we can say that it refers to a set of application and news uses for the Internet, reflecting an evolution, once technical, social and economic.
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- Youtube was launched in December 2005 - Google purchased Youtube in 2006 for the tidy sum of $1.65 billion - The amount of traffic generated by Youtube in 2008 equals the amount on the entire Internet in 2000 - Advertising expenditures around the globe have reached 479 billion dollars in 2008 (growth of 7% compared to 2007) - Prediction for the advertising expenditures by the end of the year 2014: 532 billion dollars - Advertising expenditures on the Internet represent more or less 5% of total advertising expenditures on a global level - At the beginning, there were no advertising on Youtube and this was a deliberate decision to achieve the community-driven status - Google, the owner of Youtube, is a public corporation, which means that their stock is available to the public - Advertising revenues have contributed 99% of Google's revenues since 2005 - Google doesn't share Youtube's financial information but Youtube remains independent from Google - There is a variety of advertising on Youtube; standard banner ads, homepage video ads, simple video ads, InVideo ads, .. - An ad on Youtube's homepage costs 175,000 dollars per day - The most prominent concurrent for online content distribution is Hulu |
Technical? The technologies used for the Web 2.0 are aimed at making the Internet more and more interactive. Social? It encourages the exchange of information between Internet users. And finally, economic? The network economy is based now on the abundance of resources available and growth in the number of users. De facto, there are changes. The most important one is that this new model of economics is based on the valorization of a Web audience, where exposure and visibility are the keys to success.
However, there is a flaw in that system: the intellectual property rights are no longer "important" because it is common that products protected by those rights are easily available, without authorization. What concerns advertising, Youtube provides media content to viewers but more important, attention to advertisers. The platform works as the others (Dailymotion for instance) using the Web 2.0; it provides free services financed by the advertisers. For them, online advertising is useful in the way that Internet provides the ability to track, target and measure users' behavior and interests. Youtube also helps to make a video going viral!
The political economy of Youtube
We can described political economy as "how the medium is organized and controlled within the larger political economy." In other words, it concerns who has power to make decisions about that medium.
Youtube started with the help of funds (for example, Sequoia Capital which had previously helped finance Apple, Google, and so on). Theses investment funds sometimes includes an ownership stake in the company but it is difficult to measure the amount of control or involvement in the company. The basic structure of Youtube's content business model is providing branded channels that featured a specific company's content. Youtube has great opportunities for advertisers and companies to make content visibility (and money, of course). We can think about Lionsgate Films that has promoted films by running contests that ask consumers to create their own versions of movie trailers. These amateur videos become free advertising for the company and exposure for the creator of the trailer. Good thinking! |
Advertising, Content and Copyright
Youtube evolves in the online economy and as many other sites, it runs on advertising revenues. To be effective, it needs attractive content to draw audience attention and the traffic that will persuade advertisers to spend money. This is for that reason that Youtube uses major players in the copyright industries as "key suppliers" of content. Indeed, Youtube has agreements with some music industries that have their own channels on Youtube but often, the rights are violated. |
Thus, what is important for online economy is traffic. However, high-volume traffic has not equaled big ad attraction. Indeed, advertisements can be associated with something that advertisers don't want to. To control this issue, Youtube tries to link advertised products, services to relevant videos. These content partner program functions are a strategy that legitimizes Youtube as a safe website for advertising. Also, Youtube has become a launch pad for viral video, thanks to the ease of use for sharing (via text messages, chat, e-mail, ..). It has indeed the potential to become a platform for viral marketing.
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Chad Hurley and Steve Chen, two of the three founders announcing the decision of Google to buy the video-sharing platform, Youtube, on their own website.
By purchasing Youtube, the popular search engine Google wanted first to acquire a popular site to then monetize it. In other words, figure out how to make money from it.
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Besides the dominant "leasure" aspect, Youtube acts as a curator, it groups the archive that can be used by different user groups (student, artist, journalist, ..) and for many different aims. Thanks to the ease of use and the fame of the website, Youtube has to be part of marketing strategies.
As a conclusion, we can say that Youtube is a pleasant way of spending time, with some informational benefits as well! |