The trouble with YouTube

There have been plenty of reports that, despite its gigantic audience, Google's YouTube is a money sink without a business model that is doomed to bleed its non-evil-doing parent until the Google admits defeat. However, Google's David Eun, vice president of strategic partnerships and the man tasked with monetizing all those skateboarding dogs, sat down with paidContent.org's Staci Kramer to set the record straight: YouTube is doing fine, and it is not, as Time Magazine would have you think, one of the ten biggest tech failures of the past decade.

In the interview, Eun provides excellent insight into how YouTube is viewed from the inside, the site's strategy, its advantages and disadvantages, and its relation to advertisers--albeit with a touch of evasion. Most of the usual suspects come up: questions about revenue, monetization, international distribution and, of course, Hulu.

Eun makes the case that that Hulu, to which YouTube is endlessly compared, is simply a TV model moved online with TV networks holding the controlling stakes, whereas YouTube is "more of an open democratic platform and anyone from a filmmaker to a major studio can find a voice on our platform."

I for one am glad Google sees its $1.65 billion baby in such an altruistic light, but, at the end of the day, people simply won't stop clamoring about YouTube's model until Google breaks out its expenses and revenues and shows the latter is greater than the former.

And in answering the inevitable question about YouTube's business model, Eun makes two very interesting, seemingly contradictory, statements.

First, in regards to whether YouTube can continue to expand at its present rate: "We're not going to make content available if the business model around it is not sustainable." Then, second, about making pre-rolls automatic on embedded players: "It would be a mistake to organize around a business model and then try to force the usage around it."

Huh? You're going to consider the business case before you expand in one direction, but let users flock to you without a clear model in another?

Eun also says that YouTube is "monetizing more than anyone else is making," and that outside estimates of the site's expenses are much too high because they don't account for Google's internal efficiencies with hosting and serving video. But Eun unknowingly expresses the major issue with YouTube--lack of direction.

YouTube has worked to monetize efficiently with AdWords integration and more premium content, but now it will let users flood its servers with videos direct from Android phones. Those should command some high CPMs.

To its defense, YouTube has shown a willingness to experiment to find new ways to monetize, such as paid downloads, Google News integration, new ad formats and selling search ads. Maybe one of these efforts will pay off in spades eventually, but there has not been a clear winner in the bunch that YouTube has been able to focus on like Google has with selling ads around keywords.

I'm impressed by the vision Eun displays in the interview, and I think YouTube's clear superiority in brand and reach should have warranted its exclusion from Time's list. But for now, serious questions remain about the site's long-term prospects for serious profits. 

- Pete
 @fierceonlinevid