The Economist On YouTube

The trouble with YouTubepdf

That is why people like Chad Hurley and Steven Chen (pictured), the co-founders of YouTube, the clear leader of the pack by audience size, are casting around for a business model. Aware that inserting advertisements at the beginning of video clips, as some sites do, is annoying and risks driving away YouTube’s users, Mr Hurley and Mr Chen have announced two experiments with advertising, with the promise of more to come. One idea is for “brand channels” in which corporate customers create pages for their own promotional clips. Warner Brothers Records, a music label, led the way, setting up a page to promote a new album by Paris Hilton. The second experiment is “participatory video ads”, whereby advertisements can be uploaded and then rated, shared and tagged just like amateur clips. This “encourages engagement and participation,” the company declares.

Even as advertisers evaluate these new ideas, however, YouTube and the other video-sharing sites face other difficulties. For one thing, they are in a no-man’s land of copyright law: they promise to pull pirated content from their sites when asked to do so, but it is only a matter of time before one of them is hit with a big lawsuit. Then there are the costs of running such a site—video requires a lot of bandwidth and storage. A rival estimates that YouTube is losing more than $500,000 a month.

[…] During the previous internet bubble, they would have rushed to list their shares as fast as they could; this time around, many will try to be bought by media conglomerates instead. Last week 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. Little wonder then that the founders of YouTube, Guba and other independent video sites go to great lengths to be quoted saying respectful things about other media moguls.