Does Starbucks sell coffee? Obvious answer is that Starbucks provides an expensive and comfortable environment so that people will buy overpriced coffee. The same business model is being pursued by websites that host user-generated content such as personal blogs, photographs and amateur videos, which can be uploaded and watched on sites such as Blogspot, Flickr, Google Images, YouTube, Google Video, MySpace, Guba, Veoh and Metacafe. By offering a setting for free interaction, such sites provide the online equivalent of comfy chairs found in Starbucks. The trouble is that, so far, there is no equivalent of the overpriced coffee that brings in the money and pays the bills.
YouTube, the clear leader in its category by audience size, is casting around for a business model for sustenance. Some estimates put YouTube's current loses at more than $500,000 a month. Afterall there are the costs of running such a site—--video requires a lot of bandwidth and storage.
YouTube and the other video-sharing sites face another big hurdle---infringement of copyright law. I've seen almost entire Bollywood movies being uploaded on YouTube. Now this is serious matter. Though the sites promise to pull pirated content when asked to do so, but it is only a matter of time before one of them is hit with a big lawsuit.
Since users do not like advertisements inserted at the beginning of video clips, YouTube has announced two experiments with advertising. One idea is for “brand channels” in which corporate customers create pages for their own promotional clips. The second experiment is “participatory video ads”, whereby advertisements can be uploaded and then rated, shared and tagged just like amateur clips.
Another concern for the advertisers is putting paid-for advertisements alongside amateur video clips, perhaps based on keywords or tags. Many firms will be cautious about letting an automatic system—such as, say, Google's AdSense—place their ads next to user-generated clips of unknown provenance and with potentially embarrassing contents.
Another revenue source can be a combination of advertising plus the sale and rental of commercial video material. Guba.com offers both free amateur videos and paid-for content, including films from Sony and Warner Brothers. Google Video allows content owners to charge for video. This suggests that internet-video sites are on a collision course with DVD-rental outfits, such as Netflix, which are moving towards the delivery of films via the internet, rather than as discs sent through the post.
Another strategy that can be adopted by the 200-odd internet-video sites can be to woo and be bought over by media conglomerates instead. Recently Sony, which has a large film studio and lots of video to promote, bought Grouper, a small video-sharing site, for $65m. And News Corporation, Rupert Murdoch's media conglomerate, is turning MySpace, its popular social-networking site, into a challenger to YouTube.
It will be interesting to see whether the enterprsing spirit that gave birth to the concept of user-generated content sharing would be able to come out with novel revenue generation model as well or will it be the same old story of big sharks eating smaller fish.
Source: The Economist
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1 comment:
it did worry me as to the viablity of free content providers on the web. google is a case in point though they are as diverse as you can get in terms of services offered. this article offers some good insights..
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