Does YouTube Actually Make any Money - Essay Example

?Executive Summary: YouTube since its inception has been on the road of exponential growth. Its solid foundation received farther strengthening when the company merged with Google in 2008. This merger has been good for both companies; each is complementing the operations of the other while retaining their individual identity. YouTube has very recently changed its websites layout, which has enhanced its functional capabilities. This new layout enables its advertisers to advertise more effectively to their target audience. This new layout is more personalised for account holders and fit all the assessment criteria’ of online marketing. The website through this new layout is able to avoid the clustered view, which its other competitors are displaying. The company has taken effective and timely measures to maximise the opportunities presented by m-commerce. Although the company has problems with regards to its database maintenance and high cost of streaming videos, but still then it can minimise these losses by selling the viewer data that it has extracted through its website. However, the company is very effectively employing its e-marketing mix and as a result it has been able to establish strong brand equity and brand awareness. The company in order to keep its growth going needs to encourage its community to add more interesting video to the website. The way the company has used its strategic alliances with other companies has been exceptional. It not only has added more viewers to its website but also it has created a new utility for its website. It has show the world how online medium can be integrated with television technology; it has show the world how election campaigns can be run on the internet and most importantly it has given its customers new audiences. Background of YouTube: In 2005, founders of YouTube registered the domain name and URL for the website and initiated its Beta phase. The site was meant for other businesses to embed their videos on this forum. Looking at the profitability potential of the websites concept, Sequoia Capital invested the company $3.5 million. Before its official launch in December 2005, the website was already generating traffic of 8 million viewers (The Telegraph, 2010). The website enabled viewers to share their favourite videos, watch and discover new videos. The website was receiving 100 million video views per day and simultaneously was being uploaded with 65000 videos each day; this was the period of July 2006 (YouTube Timeline). The progress of You tube was being watched by Google very closely, having seen the progress the company was making, Google went on to buy the company for $1.65 billion (BBC News, 2006). Now the company works a subsidiary of Google, but still retains its individual identity (Arnott, 2008). With this merger YouTube became YouTube timeline. This new forum facilitated individuals across the globe to connect, inspire and inform their counterparts. YouTube since its merger with Google has gone on to make strategic alliances with companies like CNN, Reuters and etch. It has broadened the scope of its operations by offering the forum as a debating platform and also a place where election candidates can undertake their election campaigns. You Tube’s Business: Since its inception YouTube has become one of the most popular search engines. YouTube has become the second biggest search engine all over the world (Johnson, 2009). Thus, it provides a great opportunity for online advertisers to use this forum to advertise their products and services (Johnson, 2009). The main attraction for online advertisers is the high traffic that the website is able to generate towards it. In this regards, YouTube in recent years have undergone deals with different companies, in which its host live streaming events, allow video renting and display music videos site links (Halliday, 2011). Business Environment of YouTube: YouTube can be classified as a business that is competing in a video sharing market. With its strong brand equity, brand awareness and a powerful backing from its parent company Google, the company is in a good place to fight competing online file sharing websites. With its strong traffic generating potential it offers a strong platform for advertising. However, recent research does not consider online advertisement as an effective medium of communication, but rather supports the notion that Television advertisements are still the most effective communication medium. Moreover, economic crisis in the world have led advertisers to cut back their advertising expenditure. The pay per click model of online advertisement has become very expense for these advertisers. Other than these issues, YouTube is also engulfed with legal and cultural issues, which arises when some videos are found to be offending to the viewers of some cultures. With advertisers holding back on advertising, viewers not finding enough attractive videos to watch, and the company engulfed with the high cost of video streaming, the current picture for YouTube is looking very bleak. These problems are compounded by the free-video sharing websites, which reinforce consumers mindset that whatever is present on the internet is for free and for everybody (Jarret, 2010). E-marketing Business: The fundamental objectives which the e-marketing business tries to accomplish are customer acquisition (convincing customers, through a value proposition, to visit the website), customer conversion (keeping customer attracted to the website and encourage the customer to come back again), and customer retention (inculcating loyalty in customer towards the website, so that he keeps coming back to the website out of habit rather than advertisement) (Chaffey, 2011). YouTube’s business works on the principle of generating a bug customer base (traffic) and give advertisers an opportunity to sell their message to this customer base. So, fundamentally YouTube through its complementary services tries to create high viewer traffic and increase advertisement audience for the advertisers (Massola, 2006). In this endeavour their (YouTube) strong brand recognition and support from Google plays a critical role in generating traffic. Once the advertisers have communicated their online message to the viewers, they pray that the viewers initiate the word-of-mouth processes to farther the advertisers’ message (Kam, 2009). E-marketing activities: YouTube’s position in the video sharing market mostly depends on its ability to generate traffic. This is an integral requirement of its business model. You tube accomplishes this objective by the following ways: Social Media: YouTube have alliances with Face book and Twitter, which offers a platform for sharing interesting videos present on YouTube, and then provide an opportunity for a discussion regarding the video that has been shared. YouTube through its own page on Twitter and Face book keep their online viewers updated about the latest videos and content that has been added in the websites database. YouTube itself is considered to be a social networking website as it nearly caters to 23% of the social communication. Since the website has a strict policy with regards to the message and content of the uploaded material, therefore this makes it a website which can be view by individuals of all ages, thereby, strengthening the company’s claim of being the most effective online medium for advertising (Gill, Arlitt, Li, and Mahanti, 2007). M-Commerce: YouTube offers M-commerce customers with YouTube Application, which allows interested viewer to directly access the websites database without visiting logging on to the website. This application can support advertisers by augmenting their traditional marketing mediums. Exponential rise in M-commerce technology and the arrival of 3G internet connections, this application can take the advertisers message right to the point when the customer is making a purchase decision or is having a purchase intention. This application also allows account holders to rapidly upload an interesting video and quickly share that video with his friends. This facilitation helps to build up traffic on the main website (Cisco, 2012). Strategic Alliances: Recently YouTube has undergone a series of strategic alliances. It has tried to give its viewers a reason for coming on to the website (Chaffey and Smith, 2008). In this endeavour the company has used strategic partners. Some of the most popular strategic alliances done by the company are (Lange, 2007): Space Lab: it is a competition of children of ages 14-18. In this competition children are asked to come up with experiments which will be performed by the astronauts of NASA in a space station. These experiments can be viewed by the entire world on YouTube. Space Lab program is a joint venture of YouTube, Lenovo and Space Adventures. Your Film Festival: YouTube, Emirates, Venice Film Festival and Scott Free Productions have sponsored this competition to find the world’s best story tellers. This competition will connect these talented individuals with a global audience. YouTube in this venture will be raising the story videos, from different participant across the world, through its website. YouTube Debates: this is the world’s first web-to-television integration. In this venture YouTube has partnered with CNN, in this venture the voter would ask questions from presidential candidates via a YouTube. Voters would upload their video containing their question form the candidates. YouTube since the success of this venture has partnered with other local news channels to cover mid-term election debates in a similar way. YouTube on Gulf oil spill: during the time of the Gulf Oil Spill, YouTube partnered with PBS to show the live streaming of the leakage. In this venture a Google Moderator was launched to seek different ideas from citizens regarding how to resolve the crisis. The best ideas were also put up for a vote. ABC’s Good Morning America: Good Morning America used the services of YouTube to capture videos of families on the event of Thanks giving. The host of this show asked interested families to upload their videos via YouTube so that it can be shared with television viewers also. Fox News interview with President Barrack Obama: the host of this show used Google moderator to collect public questions, for him to put these questions in front of the President. Reuters Global forum on Economy: Reuters while initiating their new concept of holding debate on the economy used the services of two YouTube commentators rather than economists. The lively manner in which they debated made the concept a huge success. E-marketing Objectives of YouTube: Personalisation: making sure that the viewer account and his preferences in his account are sorted according to his own will. In this regard the website has features like “create a playlist”, “Build your Queue”, “Manage your Subscriptions” and etch. This makes the webpage relevant for each account holder, thus giving them a personalised feeling through a personalised webpage. The mobile applications of the website fulfil the following criteria’ of online marketing: Permission Marketing: Seeking consumers’ permission for sending them new video updates. Participatory Marketing: Respecting consumers’ wishes to give feedback regarding a video. And using it to open a communication thread regarding the content of the video. Anticipatory Marketing: Asking consumers’ their preference with regards to the time, when they are ready to receive information on new updates. Privacy: Respecting customers wishes with regards to the information they want to share with the website and the public. The customer is given options regarding his choice to share a video. The website allows the account holder to share his uploaded video with his selected group of audience or with global audience. Security: Customers private information is not shared with any other company or agency without customer consent. Site: the transacting medium, which in this case is the website, is both user-friendly and informative making the advertisers and viewers experience on the website a memorable one. Community: the company is socially responsible and understands the role it plays in its community. It considers its viewers and advertisers as an integral part of its community. In order to have good ties with all its community members, it has set strict guidelines with regards to the content of the material being uploaded on the website. The company knows very clearly what it does not want to be and therefore it is preventing the uploading of content which maligns their corporate image. Web Analysis: YouTube has very nicely tailored its website to meet its e-marketing objectives. The company has been very effective in identifying online niche markets for it advertising partners. It has built-in features on its website which allow it to gather vital viewer data that can be used not only by it but also its channel partners. The data gathered through the viewers’ site surfing history can be used to make appropriate advertisements. Features like the “Like tool”, “Dislike” and “Flag”, they give vital information with regards to the mood of the viewer. This data can be used to plan the timings of advertisement videos (Hilderbrand, 2007). The web layout allows the viewer to know which videos are being watched by global audiences. In this way this feature helps to share interests of one community member with another. The web layout can be tailored according to the preferences of the account holder. He can flip up and top his favourite videos and share his likes and dislikes with community members. YouTube allows its account holder the luxury to maintain a private video sharing forum. In this forum he will have exclusive rights to allow or disallow any person present who wants to become a member of his small community. It must be said that the website is extremely user-friendly, and is made in a format which allows a viewers the luxury to watch videos uninterrupted and for as long as they likes. The website allows online advertisers the luxury to customise their online advertisement campaign. They can not only control the cost of advertisement but also can decide the when to show the video and in what region to show the video. The advertisers can monitor the effectiveness of their advertisement video and having measures like: conversion rates, viewed rates, time spent on the video and etches. All this information is vital for the advertiser as he can keep track of his advertisement budget and abandon a campaign immediately it the data he his receiving is discouraging. In this way he can curtail his expenditure and avoid incurring big promotional losses. The website is heavily integrated with the database of Google which allows it to have addition search words; this further optimises its searching function. The website lacks the cluster of videos which are a usually sight of other video sharing website. The webpage has been very effectively divided amongst “Recommended videos section”, “Viewers Choice section” and “Sponsored videos section”. However one problem which has always troubled new account opener is the problem of deciding a username and password. Since the site has so many account holders that it becomes difficult for new arrival to find quickly a user name and password. This has proved to be very annoying for the new arrivals. Recommendations: The website has a very diverse and knowledgeable team to operate it. It has the knowledge base and support of Google to augment its team. So in this case, suggesting something to this company sounds like a very funny thing. However, there are few recommendations for the company. Firstly, it can reduce the cost it is incurring on video streaming by selling the viewer data it captured through its website. It can sell this data to its partners and data seeking agencies. Secondly, there is scope present for the website to integrate in its database, software which allows it know the mood trends of its community. Last but not the least, the website does not have any feature that allows a user to view all the videos uploaded by a single owner. This leads to a tedious task of finding individual videos present at separate place in the website’s database. It also needs to add a feature which allows viewers to download a video for later viewing. This feature should allow the viewers to download a video for later viewing without having to go on the internet. Conclusion: After analysing the website of YouTube, it is pretty much clear why the website has strong brand identity and brand awareness. Due to its user-friendly layout and features, the website has attracted a number of audiences towards it. The company has been able to redefine the concept of strategic alliances; it has undertaken partnerships which had a very novel concept behind them. These strategic alliances were totally in alignment with the company’s corporate goals. The company through these alliances connected its channel partners with its audiences. The website’s portfolio of applications and features are viewer entered and ensure that the viewers spend a memorable time on the website. List of References Arnott, S. (2008). ‘Google admits it still can’t make money from YouTube’, The Independent, 13 June. BBC News. (2006). ‘Google buys YouTube for $1.65bn’ (Online), BBC News, 10 October. Retrieved from: http://news.bbc.co.uk/1/hi/business/6034577.stm [Accessed on 20th April 2012]. Chaffey, D. (2011).E-Business & E-Commerce Management, 5th ed. Harlow: FT Prentice Hall. Chaffey, D., and Smith, PR. (2008). eMarketing excellence: Planning and optimizing your digital marketing, 3rd ed. Oxford: Butterworth-Heinemann. Cisco. (2012). ‘Global Mobile Data Traffic Forecast Update, 2011-2016’,Cisco Visual Netowrking Index, February 14. Gill, P., Arlitt, M., Li, Z., and Mahanti. (2007). ‘YouTube traffic characterization: a view from the edge.’ IMC’07 Proceedings of the 7th ACM SIGCOMM Conference on Internet Measurement, New York: ACM. Halliday, J. (2011). ‘YouTube launches online movie rental service in the UK’, The Guardian, 7 October. Hilderbrand, L. (2007). ‘YouTube: where cultural memory and copyright converge.’ Film Quarterly, vol. 61, no. 1, pp. 48-57. Jarret, K. (2010). ‘YouTube: online video and participatory culture.’ Continuum: Journal of Media and Cultural Studies, vol. 24, no. 2, pp. 327-330. Johnson, B. (2009). ‘Does YouTube actually make any money?’, The Guardian, 7 April. Kam, D. (2009). ‘YouTube Marketing Strategy’, MarketingDeviant, April 17. Retrieved from: http://marketingdeviant.com/youtube-marketing-strategy/ (Accessed 18th April 2012). Lange, P. G. (2007). ‘Publicly Private and Privately Public: Social Networking on YouTube.’ Journal of Computer-Mediated Communication, vol. 13, no. 1, pp. 361–380 Massola, J. (2006). ‘Google pays the price to capture online video zeitgeist’ [Online}, Eureka Street, 30th October. Retrieved from: http://www.eurekastreet.com.au/article.aspx?aeid=1837 (Accessed 13th April 2012). The Telegraph (2010). ‘YouTube: a history’ (Online), The Telegraph, April 17. Retrieved from: http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-media/7596636/YouTube-a-history.html [Accessed on: 20th April 2012]. YouTube Timeline. Retrieved from: http://www.youtube.com/t/press_timeline [Accessed on: 20th April 2012]. Read More