Cat fight: Watch out YouTube, here comes Facebook

10 years, billions of vids, no actual business

I may not be the best person to write this. I am, after all, a YouTube refugee. Or renegade. Or reject.

Roughly eight years ago YouTube booted me for posting a 20-second video I took at an Arsenal soccer match. While I have apparently been granted a recent pardon (I can upload again!), my criminal status has kept me from using YouTube much except to listen to old Megadeth songs I don’t want enough to buy.

And herein lies a problem not specific to me. Despite 10 years of history, marked earlier this year, one billion monthly viewers, and $4bn in ad revenue last year, YouTube still isn’t profitable. While inside sources tell the Wall Street Journal YouTube is “roughly break-even,” this isn’t nearly enough.

Not when Facebook looms.

YouTube: Billions Of Cats

Let’s be clear: YouTube, despite its persistent lack of profitability, is a big deal. As big as video is on the web, it’s biggest on YouTube, where user-generated video and professional video mingle to upload 300 hours of video every minute, video that has attracted over one million advertisers.

Sure, much of that content is rubbish. Or, at least, rubbish to someone else.

Take, for example, gaming. One month I noticed my son’s smartphone data bill (which, in reality, is my phone bill, due to shared DNA and a shared bank account until I kick him out at the age of 18) was stratospheric. I couldn’t imagine what he was watching, but assumed the worst: porn.

In fact, he, like millions of others, was watching games. Specifically, other people playing games like Halo, FIFA, etc. Think it’s just my son and an isolated pool of gaming nerds? Think again: the second most searched term on YouTube in 2014 was Minecraft.

Lest you think the rest of humanity better uses its time, take a look at the top channels on YouTube. The top earning channel on YouTube? DisneyCollector BR, a site featuring a woman’s hands unboxing and playing with kid toys.

How’s that for high brow?

Sure, Taylor Swift (#2) and Jimmy Fallon (#3) also round out the leaders, but across the top-1000 YouTube channels there’s plenty of music (25 per cent), gaming (20 per cent), comedy (14 per cent), and entertainment (13 per cent), among others.

Oh, and cat videos. Two million of them, generating 25 billion views. Entire corporations have been brought down by indulging orgies of online video viewing (like U.S. retailer J.C. Penney).

This has got to stop. Or, more likely, move to Facebook. The Facebook Menace Facebook also does video. Lots and lots of video.

Indeed, the social site claims to have been growing its video views at a torrid pace, surpassing four billion views each day, as the company mentioned on one earnings call, a huge bump from the one billion views just last summer.

That’s not yet YouTube territory, but it’s not far off, and gaining fast.

Sure, most of that Facebook video content is user-generated. But then, that’s where YouTube started, too. And, as OpenSlate data demonstrates, YouTube is still there. As mentioned, the top earning channel on YouTube is DisneyCollector BR, a kids toy site.

Is that really what YouTube wants to be?

As Pivotal Research analyst Brian Weiser declares: “There’s a lot of junk” on YouTube. “If they want meaningful TV budgets, they need to invest in TV content,” he concludes.

Facebook doesn’t have the same pressures. Unlike YouTube, Facebook’s billion users generated $12 billion in revenue last year, and $3 billion in profit.

This despite having no obnoxious pre-roll video advertising, and no plans to impose any. As a Facebook executive insists in an interview, “We’re pleased with the growth in consumer video and paid video. That’s our strategy.”

In other words, Facebook just needs more users spending more time on its site, and video may well serve as a complement to other, ad-supported content.

The Past And Future Of YouTube

YouTube doesn’t have that luxury. The company for years has tried to turn itself into more of a destination, rather than a transitory site for inbound links to content that mostly skews toward a young, niche audience.

Music videos are its top content. Gaming is second. Advertisers looking to find would-be buyers of their products will find relatively few among this set. You can try to sell to my son, but I guarantee his budget is severely constrained, especially since I figured out how to cap his data.

Pivotal’s Weiser believes that nine per cent of YouTube viewers account for 85% of video views. Remove my son from the calculus, and that number falls precipitously, but the principle remains: boring old TV is still a better bet for advertisers, or Facebook, which allows video to be a loss leader for the rest of its profitable platform.

In sum, 10 years in, YouTube still hasn’t proved itself as a business, even as its cultural resonance is under fire from Facebook. That’s not a recipe for business success. ®

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