Last year, Google became dissatisfied with losing money on YouTube which they purchased back in 2006 for $1.6 billion. In 2010, YouTube was the third most visited site in the world and raked in $544 million in revenue, making it almost profitable and this year revenues are projected to be around $1 billion according to Citigroup Inc. The thought of YouTube becoming profitable is as bizarre as Google taking the initiative to position YouTube in the world of cable and set-top box providers. They are, however, attempting to organize quite a line up of partnerships and shelling out $100 million in cash to make this all come together sometime next year.
The first we heard of YouTube's initiative was in April of this year, when they announced the re-positioning of YouTube, centered around 2 things: original content creation and a channel-based user experience. YouTube has solicited a variety of Hollywood content creators and offered cash advances for them to create several hours of content per channel per month.
People like pro skater Tony Hawk have been in talks with YouTube and are very close to reaching a deal if they haven't already. Verso Entertainment and Cash Warren might be bringing some mainstream sports coverage to the table as well. Partnerships with FremantleMedia Ltd, who is responsible for The X Factor, and Electus, which produced Mob Wives, are also in the mix bringing a wide variety of content. A YouTube spokesperson didn't offer anything concrete as far as who selected partners are but they are still actively talking to lots of content creators.
We don't comment on rumor or speculation, but we're always talking to content creators and curators of all kinds about building audiences on YouTube.
Will these changes in YouTube position YouTube for success in the future? Hit the break to find out.
In the past, advertisers have been concerned about the lack of quality in the content produced by its users and YouTube has been suffering because of it. Hulu can charge advertisers $25 per 1000 times a particular ad is shown and YouTube doesn't command anything near that. Over the past couple of years some advertisers have perceived the quality of content to be increasing and David Cohen, executive vice president at Universal McCann thinks the new strategy shows their commitment to high quality content. He also thinks the channels will get YouTube some Hulu-like ad rates.
There is nothing preventing YouTube from getting Hulu-type ad rates assuming the final content is as engaging as we anticipate.
For the 20 categories of channels, YouTube has been pitched more than 150 ideas and is going to go with a few dozen to kick things off. They have also told content creators for those channels that they want unique content that is different from what's on TV. Users who generate content will still be able to create videos and share in the advertising revenues just like before, so the new channels won't threaten that part of YouTube. We should expect to see this roll out sometime next year and with positive responses so far, things are looking good.