YouTube Business Analysis - Case Study Example

Andrea Rebolledo April 3, YouTube Case Study Analysis Summary YouTube is one of the Google subsidiaries providing global video streaming services and is digital marketing channel. This study will critically evaluate the process of brand equity development of any organization via YouTube. Analysis YouTube is facing different types of issues in order to provide live video streaming facilities to the users. They are providing video streaming on different organizations, entertainment series and various brand promotional services. In the internet friendly world YouTube is facing the challenge of intense competition in the digital media-marketing segment (Aaker, 2011. P.198). There are several video streaming websites in the world who are substituting the digital marketing features of YouTube. Apart from competition YouTube is facing many financial challenges. YouTube is experiencing reduced rate of profits in the contemporary years. Another interesting finding from the case is that YouTube is aiming to gain $66 billion through investments made on digital media or television advertisement. However, inflation and recession is reducing the scope of profit earning for YouTube. Digital media marketing is mainly having two options like TV and online video streaming. Online media are the most emerging promotional channel. Despite the fact that online advertisement policies are quite complex, YouTube is gaining high rate of popularity among the youth and business organizations. On the contrary, the reach of television advertisements is greater but with huge initial cost. This type of advertisements demands more professionalism from the marketing agents. Subscription fees are the major restrictions for the organizations in the time of economic crisis or post crisis time (Aaker, 2011. P. 202). In the following section, the five competitive forces model of Michael Porter and Aaker Analysis will be applied to evaluate various positive and negative external issues faced by YouTube. These models will aid in outlining the market situation or complexity faced by YouTube. Porter’s Five Competitive Forces Model Bargaining power of buyers: Potential buyers are the major attribute of online brand equity development for YouTube. Mainly the buyers of YouTube are the banner and streaming advertisement providers. Buyers have the capacity to negotiate advertising charges and cost in YouTube. High power of the buyers defines the market compatibility and risks (Porter, 1980. P.108). Demand and supply, price and competitor firms are affecting power of the customers. In the post economic crisis era, organizations are seeking low rate of advertising cost. Thus, bargaining power of the buyers in the YouTube business can be assessed as high to impact their brand values. Bargaining power of suppliers: Profitability of the organization depends on various attributes, suppliers bargaining power is one of them (Porter, 1980. P.122). YouTube have suppliers like content developers, Internet service providers, and the ad agencies and these are usually large in numbers. Suppliers have high power to control the promotional policies, advertising charges policies of YouTube. Entry barriers: YouTube has a huge customer base; almost half of global video streamers are using this portal. One of the positive aspects is that YouTube does not charge the users and video subscribers. Moreover, brand name of the mother organization Google as well as its own brand name is helping them to create a shield on new entries (Porter, 1980. P.235). YouTube’s success criteria attracted various organizations to the video streaming industry. Thus, entry barrier is required to reduce the loss of market share and profitability. Availability of substitutes: Global video streaming websites are facing intense challenge from the substitutes as well. E-commerce websites and other digital organizations that own portals that provide digital marketing contents are the major substitutes. These substitutes are gaining market share rapidly. Substitutes therefore can play a major role in transforming the business operation of a firm (Porter, 1980. P.216). It can also be said that substitutes are reflecting the rate of profit generation and brand equity development of an industry. Therefore, considering these aspects, the power of substitutes in this industry is assessed to be high. Rivalry among organizations: internet marketing or social media marketing industry is intensely competitive. Established players such as Netflix, Hulu, Vine, YouTube, DailyMotion, Amazon and Vessel among others dominate the industry. Therefore, intense competition is present among the organizations. As a result, clients have various options for promoting their brands through diverse digital marketing channels and are no longer limited to a single portal (Porter, 1980. P.191). For instance, Netflix is offering a lower cost base for digital marketing. Despite the fierce competition in the industry, major globalized brands are still choosing the YouTube portal to promote their brands. While this gives YouTube a competitive advantage over the rest, the organization needs to continue developing strategies that will allow them to retain their customers and develop more competency. The analysis of the aforementioned competitive forces have clearly showcased that there is intense pressure on the company pertaining to the industry forces. Competition is playing a great role the slow growth of digital marketing channel of the organization. For instance, competitive rivalry among the established players is stretching the market to lower profitability. Hence, the pricing of the digital marketing spectrums is quite tough due to the fierce competition (Porter, 1980. P. 196). In the next section, Aaker market analysis will be applied to get in-depth idea of the current market position of YouTube. David A. Aaker developed a new type of market analysis tool in terms of outlining different obstacles and issues faced by the global organizations. There are different factors that are considered for assessing the market position (Aaker, 2011. P.214). The Aaker model will be applied to unearth the market size of the organization, existing opportunity, growth rate, profitability opportunities and also the cost structure of such social media. The analysis will also help to gain a fair idea on the distribution channels, contemporary trends of the market for YouTube and major achievement criteria of the USA video streaming market. Most importantly, the Aaker model can be used to investigate on the brand equity (Aaker, 2011. P. 221). Market Size: In the USA market, it is observed that TV advertisements are developed in three different lengths of 15, 30 and 60 seconds. Potentiality, YouTube’s ads will be determined on the basis of the rate of customer browsing and the feasibility of the information provided in advertisement (Trout and Rivkin, 2008. P. 217). In the USA television advertisement market, more than 160 advertisements are broadcasted daily. Moreover, potential customers are expected to go through 58,400 advisements per year. Therefore, YouTube has the opportunity of utilizing the TV ad spaces for audiences. Future scope of the digital media broadcasting can be in the form of rapid growth rate of the USA digital market. People nowadays, are running out of time to watch TV they are more attracted to the social media or online video streaming websites. Smartphones, tablets, Laptops and many other mobile devices are used as the medium of communication and all such devices have the ability to stream videos thereby giving enough scope. People therefore through their devices can explore YouTube for the streaming of various entertainments, education, sports, news and many other videos and hence this can act as a great opportunity for both YouTube and the brands. Market growth rate: YouTube is a medium of video marketing, streaming promotional videos and banners. YouTube’s broadcasting and brand creation is developed with different demographic segmentation to attract and reach large target audiences. YouTube is expecting to achieve sound growth of sales by meeting challenge from the substitute products. YouTube is adopting various promotional policies as per the different income levels of users and they are managing contents as per individual preferences. Variety of products and brands are using the YouTube channel as their digital marketing medium. YouTube is segmenting their channels to attract customers. During the year 2014, the organization started using three types of advertising channels. Standard user channels, brand channels, and custom brand channels are the three types of channels (Aaker, 2011. P. 223). Standard user channels are mainly the entertainment video streaming channels of YouTube. On the other hand, brand channels consist of different promotional video streaming which includes various products, apparels, accessories and automobiles. Custom brand channels are mainly the special promotional segments for the authenticated brand users. Such channels are designed for the exclusive clients of YouTube. Market Profitability: Profitability of YouTube greatly is dependent on the USA online broadcasting market segments. The organization is facing lower profitability issues for adverse market situations like financial crisis, and increased compatibility. Google is also failing to generate profits from YouTube business due to this scenario. During the year 2010- 2011, it was the least profitable segment. The study has clearly shown that YouTube generated more than $5 billion from the advertisement revenue during the year 2013. Moreover, this segment reported only 9% of the entire sales recorded by Google. One of the major causes is the strong competition from Netflix, Hulu, Vine, DailyMotion, Amazon and Vessel. As a result, YouTube in the video streaming market of USA is failing to make enough profits. YouTube is trying to develop various strategies for increasing the revenue by utilizing various strategies. The organization is experiencing development in the range of exceptional viewers of the online streaming, streaming advertisements and banner advertisements. These segments are increasing rapidly and the average cost of every advertisement is increasing thereby giving new scope. Industry Cost Structure: Cost structure is one of the major criteria of market success or profitability. YouTube will be imposing certain strategies for developing efficient cost structure. In the post recessional time they reduced the costs of video streaming to attract more customers and provide them more satisfaction. However, this strategy of YouTube was a failure due to the increasing cost of technological up gradation (Trout and Rivkin, 2008. P.56). One of the distressing facts for YouTube is that content streaming cost is increasing. YouTube reported that their cost is higher than their closest competitor Netflix. Thus, revenues or profitability of YouTube is decreasing. Distribution Channels for YouTube: Distribution channels are the major determinant of developing marketing strategies of any organization (Aaker, 2011. P.221). YouTube as the distribution channel provides any brand or organization with extensive and prompt reach of people. Organizations can disseminate the information of any products or brands to the existing and potential customers through the channel of YouTube. Hence, it is evident that with fast and streamlined distribution channel and also higher acceptance rate among the consumers, the brand awareness will increase thereby resulting in higher brand equity. Market Trends: Global digital media marketing is facing intense fluctuations in terms of technology and market trends. Fluctuating market trends will create opportunities and threats for YouTube. Online video streaming will be facing the industry specific market trends as well as common customers behavior related trends. YouTube have segmented their online branding policy to develop more strategic factors. The organization segmented their streaming programmers in beauty products, food products industry, technology segments, Automobile, clothing, personal products, beverage, learning and retail industries. Key Success Factors: The key success factors will be vital for the organization in terms of achieving the market objectives. The key success factor for YouTube can be described in terms of the strong brand value. Brand value of YouTube is created by proper digital marketing strategies. YouTube is having different set of content categories that helps in maintaining higher differentiation of information. Updated video streaming list is another key strength of the YouTube. Quality of video is another factor of getting success. The organization is offering high definition video quality to attract people from all around the world. In addition, brand value of Google and huge archive of videos are other key strengths of the organization (Aaker, 2011. P.223). YouTube’s portal is offering video streaming in different languages. Hence, YouTube is succeeding to develop different strategies to that are helping them meet the demands of various organizations and customer segments. Strategic development will aid the management in meeting various factors of customer attraction for creating brand image. Recommendations The following strategic recommendation will help enhance YouTube’s brand development. To begin with, the social media site must ensure sound accessibility in the resources for digital marketing policy. Furthermore, the cost structure of YouTube needs to be changed to meet the current demands. The company is strongly recommended to pursue economies of scale for providing digital media services at a lower cost. YouTube must develop proper channels of information distribution for the products and services. YouTube, itself can be promoted in other social networking sites to gain greater visibility, which will in turn help the company to regain the lost market share. Peoples are using different social media like Facebook, Twitter, and many other social media in terms of communicating with each other, thus, YouTube can promote themselves in the social platforms. Another option for the company can be to tie up with any of the television networks like “CBS, NBC, FOX, and ABC” to attract their loyal customer base. An example of this would be to create partnerships with popular brands such as Chromecast. Such business collaboration will aid the organization in reaching more customers. Furthermore, the organization can develop strategies to increase Chromecast sales and the company’s profit. YouTube is expecting to spend $35 million in the Chromecast segment and with the return on investment the profitability will be high. Cost effective channels can be used to reach the users in order to gain cost efficiency. In addition, evaluation of the market with greater depth will further make it easy for the marketing department of the company to make the strategic decisions with much more ease. Market analysis will aid the YouTube management to gather perception over the customer’s ability to pay, cultural choice of the customer, and the competitors price offering. Thus, YouTube can develop their marketing strategies effectively to develop brand image. Brands are strongly encouraged to use this platform as one of their marketing channel. As it was mentioned throughout the analysis, YouTube is a great vehicle for reaching larger audiences and for gathering information about customers. Brands are constantly looking for tools that collect information about their customers, so that they have a better understanding of their needs and wants. They are also looking for a vehicle that allows them to communicate directly with them and that makes the interaction between brand and user more personal. YouTube provides all of these tools. Therefore, brands should use this platform to create a customer base that can be easily reached and they can engage with. Implications Cost structure of YouTube can be changed through economies of scale which is quite complex. However, with economies of scale, the company would reduce the cost of reaching the customer and thus can gain greater profitability in the long run. The development of the proper distribution channels is not only time consuming but will incur an extra cost that the company has to pay still it will help YouTube to develop their brand knowledge among the customer in long term. In order for these distribution channels to work, research needs to take place so that there is clear understanding on the relationship between the product and the potential customers. Thus, distribution channel will help YouTube in marketing of major brand and gaining new customer base. Updated with the trends of the market and adopting emerging technology will help YouTube to remain in the race and will also help to satisfy the changing needs of the customers. YouTube has to invest in research and development of the market, which will increase feasibility of the marketing channels via online video streaming portals. YouTube portal will be able to to provide more information among the users. Similarly, launching innovative channels like Chromecast and HBO might enhance the possibility of reaching more people and minimize various market related risk for YouTube. Abovementioned innovative channels will increase the attraction of customers. Collaboration with the TV channels will help the users of YouTube to access various informative videos very easily. They can watch matches, entertainment programs, and educational programs very easily. Users are able to catch the news or TV program through the YouTube portal via mobile or computer platform. Works cited Trout, Jack, and Steve Rivkin. Differentiate Or Die. Hoboken, N.J.: John Wiley & Sons, 2008. Print. Aaker, David. Brand Relevance. San Francisco, CA: Jossey-Bass, 2011. Print. Porter, Michael. Competitive Strategy. New York: Free Press, 1980. Print. “YouTube For Brands.” Harvard Business School Publishing: Brief Cases [9-514-048 May 5, 2014 rev] Read More