Thursday, June 12, 2008

YouTube Hasn't Figured Out How to Make Money

The leader of video sharing, You Tube, seems to be having a hard time making money off online content. And yet they aren't worried. As Eric Schmidt, Chief Executive states, "The goal of the company isn't to monetize everything. The goal of the company is to change the world."

And Google, the owner of You Tube, can afford to wait. Search Engine Marketing is still their bread and butter and will enable them to expand as the advertising community gets more comfortable with better targeting methods for online video. "Schmidt added that unlike most companies, Google doesn't have to worry about making money from all its ventures since its search advertising business is a cash cow. "We have the luxury of time," he said. 'Most people in the business are so pressed for time. They have to make money now.'"

In the early days of cable, it was also hard to convince advertisers that a smaller audience also meant that it was a more efficient buy. Highly targeted, upper income homes were the first to afford cable and these early adopters were harder to reach; cable was the solution. Fast forward to the internet and it is the same story. Early adopters, more targeted audience, more efficient and effective buy. An as adoption of online video expands, scalability is sure to follow. For those advertisers who risk an online strategy earlier in the life cycle, will come bigger rewards. But eventually, online video advertising, like cable advertising before it, will explode and prosper. You Tube can afford to wait for they are likely to prosper.