November 2006 - Marketing Methods

What You Should Know About YouTube

YouTube is the most popular video-sharing website today. It only began last December and it now features over 100 million short video clips, and 65,000 new videos are added daily. The site includes a combination of home videos and clips from TV shows and movies. It draws 34 million unique visitors a month and it’s one of the top 15 most visited sites in the world, according to an October 16 article in Forbes. It’s also estimated the site has 50 million users worldwide. An October 7 article in the Wall Street Journal reports that YouTube had 46 percent of visits to U.S. online-video sites in September, according to Hitwise, followed by MySpace at 21-percent share and Google Video with 11 percent.

Early on, advertisers wanted to insert 15-second, unskippable ads that would precede the videos on YouTube. However, the site avoided taking ads until recently, in order to build a loyal following. It recently ran a funny two-minute American Express ad on the site and 300,000 people watched it. The site started a “Participatory Video Ad” on the homepage in August, and it’s been sold out ever since. Also, it brings in about $175,000 and 400,000 viewers a day. Chad Hurley, one of the founders of YouTube, “believes YouTube could help redefine the $74 billion TV ad industry, combining the clout of Google’s relevant text links with the sensory power of television,” according to Forbes.

At press time, it was announced that Google had purchased YouTube for $1.65 billion. This acquisition combines Google’s huge online ad system with the biggest online video site and YouTube’s highly engaged audience. Google will now have to deal with YouTube’s copyright infringement issues, since some video and music content are now available on YouTube without the permission of the content owners. The technological and legal expertise of Google should be a great resource for helping YouTube to figure out a way to address these copyright issues.

Video now makes up 60 percent of Internet traffic and is growing rapidly, because the cost of streaming video on the web has dropped rapidly over the last few years and costs are projected to decline even further over the next several years. The demand for online-video advertising is out-stripping supply, and compelling video has the ability to capture and engage an audience.

It’s amazing that a company that started less than a year ago, has only 67 employees and hasn’t turned a profit could sell for $1.65 billion. There are people like Mark Cuban who believe that anyone who buys YouTube is crazy, because it’s a business built on piracy, as reported in an October 7 article in the New York Times. But Google, Yahoo! and other savvy marketers understand the power and profit potential of targeted online-video advertising. Direct marketers who want to stay ahead of the curve need to be testing and utilizing online-video marketing. It’s the wave of the future.

Peter Koeppel is president of Koeppel Direct Inc., a full service media buying agency based in Dallas. He can be reached at (972) 732-6110, or via e-mail at [email protected].


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