Bananas Marketing #1: YouTube

While YouTube has started some profitable initiatives, it has also made some uncorrected key mistakes in the past years, leading to a chunk of potential revenue left unearned.

YouTube Logo

(This is the first in a new series I dubbed Bananas Marketing, where I talk about both crazy ideas that ended up working and actions that leave me baffled. I analyze the problem and come up with implementable solutions. Got the idea from Gary Vaynerchuk: he half-jokingly said that sending bananas to doctors would actually be an incredible marketing move, and that someone should start a blog pointing out millennial marketing gone wrong. )

1. Let's define YouTube's revenue streams

Selling ad space

  1. Landing Page
  2. Embedded
  3. Sponsored

YouTube makes money by selling ad space on its landing page, monetized videos, and search pages both to long-time advertisers and other users on the platform.

YouTube Premium

Users can opt in to YouTube Premium, a version of YouTube with no ads, YouTube Music Premium, exclusive content, offline videos, and the ability to play videos in the background while using other apps or with the screen turned off.

Channel Membership

Inspired by Patreon's business model, YouTube partners can add a "Join" button next to their channel's subscribe button. The creator can offer special perks to the subscribers who pay $4.99/month (differs by country). YouTube keeps 30% of the membership fee paid by the subscriber.

YouTube TV

A US-exclusive subscription-based live TV streaming service much like Hulu where subscribers can watch cable channels from over 70 networks through YouTube. Around 1.5 billions users use the service at $49.99/month. There are also some premium channels at an additional cost.

Affiliate Products

Related products show under some videos on YouTube: affiliate partners pay commission to YouTube for every purchase. If a creator has an affiliated store, select items from that store will be shown below the video. Otherwise, an ad for a mobile game or some other service might be shown. YouTube takes generates revenue from both of these.

2. How does YouTube get people to participate?

Creators

Like other social media platforms, YouTube allows people to grow an audience based on the merit of their videos. YouTube rewards creators who make content that's good for the website and advertisers by giving then a cut of revenue from AdSense.

Advertisers

YouTube has quickly grown to become the dominant video platform with virtually no competition, and is host to more than a hundred million users. It's relatively cheap and usually a profitable action to host ads on YouTube. Mobile game ads are particularly worthy because more than half of YouTube views come from mobile devices and YouTube is popular among younger people.

3. The problem

Hostile to creators

In theory, the best creators should be rewarded for their content so that they are incentivized to create more content and attract more advertisers. Google and YouTube executives recognize this (“Rewarding trusted creators is a big way we can help” says Google chief executive Sundar Pichai), but in practice, YouTube demonetizes any content that could be seen as unideal for advertisers, even if that content follows all the YouTube guidelines. A spokeswoman has stated that these guidelines 'do not determine what videos are recommended, removed, or eligible for ads,' and even so, not having clear guidelines on what content YouTube or specific advertisers want is less than ideal.

Broken copyright claim system

Music companies can easily and illegitimately claim entire videos for the presence of seconds of a song in a video, even if heavily edited, remixed, or otherwise permitted under Fair Use. Up to hundreds of hours of work per video can be lost in a second by an illegitimate claim. The system has historically been so simple for the claimant that even a video that doesn't feature the claimed music piece can be demonetized, immediately hurting creators. Creators have turned to alternate revenue streams (as they should, even if they had significant revenue from AdSense) because YouTube alone can't be trusted to give consistent feedback and profit. YouTube's lack of action in fixing the system, even with small changes, hurts the creators that provide the content needed for YouTube to generate revenue. However, recently YouTube has made important policy changes to prevent copyright abuse (Skip ahead to my words on that).

Favors quantity over quality

AdSense rewards channels for generating clicks so that ads are more profitable for both YouTube and the creators. What YouTube fails to understand is the maintenance of trust and continued business with users over time. While 2 or more 15-second ads per video on a 10-minute gameplay video that took an hour to make generates immediately more ROI than those same ads on a minute-long animation that took tens of hours to make, quality content is what will keep customers happy to come back and keep buying. Prioritizing clicks over customer happiness degrades the trust of users (users know that YouTube is responsible for the ways in which creators act for profit from AdSense). The more effort creators put into their content, the more profit they risk to demonetization. Creators have worked around this by creating repositories for quality content on other platforms like Patreon, where customers pay more, and are more satisfied in the long term.

Unsafe and unreliable for kids

YouTube was able to address an earlier concern about kids being unprotected on YouTube by adding in algorithms and human flaggers to remove inappropriate comments and report illegal behavior to law enforcement.

As of late, even with YouTube's hyper-aggressive demonetization strategy that only allows ads on non-controversial content, the platform that the general public uses cannot be considered safe for kids. Maybe, it doesn't have to be, because YouTube Kids exists for young children. YouTube Kids is relatively small compared to YouTube, and older children gravitate towards YouTube.com. The content on YouTube Kids is safe, but not generally educational.

Lack of transparency

YouTube makes changes without consulting, or even communicating changes to its creators. Each time an update has affected viewership (90+% drops over one day), a public outcry has had to happen in order for YouTube to admit to the change.

Risky for advertisers

While YouTube can be a huge revenue stream for advertisers because of the leads that come in from ads, it can also be a risk.

YouTube has had advertisers drop or feel betrayed for displaying ads on extremist or otherwise dangerous content. Advertisers risk their reputation by launching ads through YouTube. A far more reliable and simple move for advertisers is to sponsor a channel directly related to their service. For example, any one popular self-improvement or college advice channels will likely be sponsored by SkillShare, a subscription-based video-course site. By selecting individual channels to sponsor, companies can practically guarantee that they will generate leads and a better reputation from the deal. While YouTube offers a way to show ads in designated areas to entire segments at once, YouTube cannot currently provide the same promise of a return-on-investment in sales and reputation to advertisers that sponsorships do.

4. The solution

The easy fixes

Communicate important updates via social media ahead of time and look for feedback from creators and advertisers. Be clear of what you're looking for. This is similar to how products are prototyped before they're fully made as to confirm buying interest. Consulting buyers to ensure the update will be helpful is essential, and transparency would go a long way to repair trust in the company.

YouTube could attempt to compete with channel sponsorships with a system of its own, perhaps inviting upstanding creators to join a network of advertising companies related to their content as potential sponsors for the channels. 

The valuable fixes

The copyright claim system is a common complaint for creative channels on YouTube. Certain abusers of the system are known, and YouTube has, especially recently, already been more vigilant in striking down abusers of the system: The Verge reported "YouTube is going after an alleged copyright troll using the Digital Millenium Copyright Act's (DMCA) Provisions, alleging that Christopher Brady used false copyright strikes to extort YouTube creators, harming the company in the process... It wasn’t until ObbyRaidz and Kenzo spoke about the alleged extortion on their individual YouTube channels that YouTube’s team learned about the issue, according to the lawsuit." It's good that YouTube is willing to protect its creators and its platform and has implemented new policies to prevent copyright abuse (Manual timestamps required, Improved editing tools to remove claimed content, Copyright owners must provide accurate data), however as mentioned earlier, it took each channel to create videos on the abuse for YouTube to take action. As changes have been made particularly recently, I don't know how the copyright abuse trend will change on YouTube, though hopefully YouTube's actions will have some effect.

I know that the people at YouTube are immensely passionate and dedicated to creating a platform for all creators so that they can bring great content to everyone. I hope this look into a case study of YouTube will serve any reader or the people at YouTube well, as it represents not only my own research and analysis, but the views of the creators on YouTube, big and small.

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