Solving the right problem.

Malcolm Gladwell gives Chris Anderson a smackdown in the New Yorker over Chris’s new book Free: The Future of a Radical Price.

This example caught my eye: So how does YouTube bring in revenue? Well, it tries to sell advertisements alongside its videos. The problem is that the videos attracted by psychological Free—pirated material, cat videos, and other forms of user-generated content—are not the sort of thing that advertisers want to be associated with. In order to sell advertising, YouTube has had to buy the rights to professionally produced content, such as television shows and movies. Credit Suisse put the cost of those licenses in 2009 at roughly two hundred and sixty million dollars. For Anderson, YouTube illustrates the principle that Free removes the necessity of aesthetic judgment. (As he puts it, YouTube proves that “crap is in the eye of the beholder.”) But, in order to make money, YouTube has been obliged to pay for programs that aren’t
crap.

It’s true that YouTube has had trouble monetizing its videos with advertising. However, as Gladwell notes, that is because existing advertisers don’t want to be associated with the content. That’s the advertisers’ problem, not YouTube’s. It doesn’t mean that there are not better ways to monetize, provided they are willing to stray from a path they know best.

Or perhaps find different advertisers. Television shows are increasingly drawing from online clips to build half hour shows; Tosh.0 comes to mind for example. Creating television (or online) shows that appeal to a similar demographic using their clips might be outside their comfort zone, but could provide revenue. Finding more radical advertisers, possibly allowing they to do a revenue split advertising deal on more edgy videos might be another way.

They’ve already created an incredibly large video library. The fact that they haven’t found the right monetization scheme doesn’t mean that “free” doesn’t work.

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