YouTube—the cause of … and solution to … all of content creators’ problems. If Homer Simpson would permit us to repurpose his infamous toast, it evokes a familiar sentiment with YouTubers when they think about the mother ship.
There’s no doubt that YouTube’s platform provided an essential foundation to launching the creative revolution we’re currently experiencing. And it is undeniable that through initiatives like its YouTube Spaces program, it has sought to democratize the production resources that large studios and agencies have leveraged to achieve their creative vision since the advent of television.
However, despite all of its incredible contributions to digital content creators, its history will at least in part be defined by its substantial failures. Many of these can be traced back to Google’s obsession with driving all of its properties back to the AdWords platform.
You can’t argue with Google’s success—that is certainly not the point of this article—but you also can’t deny that its monetization strategy has prevented YouTube from capitalizing fully on an industry that it created and severely limited its ability to move into new business models and products, which has given rise to new competitors from all directions.
Before we dive into what went wrong, let’s take a moment to quickly touch on the digital renaissance we are currently in the midst of—a movement that owes much to YouTube, along with rapid advances in camera technology thanks to mobile computing.
When YouTube launched in 2005, people still bought software in boxes, and consumer-priced DSLR (digital single-lens reflex) cameras—let’s look at the Canon Rebel for the point of comparison—came equipped with an (industry-leading) 8-megapixel sensor and storage for 70 photos, with no video capabilities.
Today’s model, which has an identical manufacturer’s suggested retail price, features a 24-megapixel sensor, shutter speeds that are 50 times as fast, a video mode that includes high-definition time lapse and 1,000 times the storage. What happened? In many ways, YouTube has Apple to thank.
The iPhone launched in the summer of 2007, and 10 years later, we are all walking around with 4k cameras that have enough embedded storage for tens of thousands of digital images and videos.
With 30 percent of the world’s 7.5 billion people now owning smartphones, the cost of camera components has plummeted as quality has spiked. Anyone with a creative inkling now has access to superior hardware and a direct internet connection.
In parallel, you have seen the software-as-a-service revolution, with editing suites (think Creative Cloud) previously costing artists thousands of dollars now accessible for under $50 per month.
Lastly, our collective knowledge has been distributed online in a way that empowers aspiring artists to develop their craft in an entirely new way. Whereas in the early 2000s you still had to learn composition, editing and other production techniques almost entirely through on-the-job training, today you can learn about the rule of thirds, color grading or editing an After Effects template in just a few clicks thanks to platforms like YouTube and Lynda.
Put it together֫—affordable, powerful, connected cameras, with superior access to tools and knowledge for emerging creators—and you had all the ingredients necessary for an unprecedented creative revolution.
The results are well-documented but still breathtaking. More than 1.3 trillion digital photos and videos will be taken this year—that’s over 4 billion per day. This year, 20 percent of the earth’s population will snap a digital image or video and upload and distribute it online.
In our personal and professional lives, everyone is a content creator. Whether you are a small business, a digital marketer, a freelancer or a traditional creative professional, working with visual content is now embedded in your day to day. We need to look no further than the market capitalization for Snap Inc., the influence of Instagram or how mainstream YouTube stars have become for validation that our personal lives have been transformed, as well.
Yes, Apple earns an important assist, but YouTube became the face of the revolution thanks to its immense distribution. It put the power back into the hands of the independent creator. We’ve all seen Samsung’s “Do What You Can’t” campaign during the Academy Awards or NCAA Men’s Division I Basketball Championship tournament, which in many ways perfectly captures YouTube’s legacy. Phones and cameras may have changed how we capture and create, but YouTube provided the motivation and means to turn that creativity into a way of life.
YouTube also deserves credit for nurturing its massive head start in video distribution by supporting the ecosystem. YouTube Spaces—a representative example of this support-infrastructure, which now boasts locations on four continents—brings together “the most creative people in the world to learn, connect and create.” Each Space provides professional production facilities, editing tools and studio quality content to ensure YouTubers maximize their creative game.
More people creating better content fuels distribution, which, in turn, inspires viewers to get out from behind the screen and become creators themselves, developing skills while using YouTube’s content and tools, and while YouTube benefits by driving monetization through AdSense. On the surface, it’s a perfect marriage.
However, we start to see cracks in the ceiling when we look closer at the relationship between creators and YouTube’s native monetization options.
With a near monopoly on distribution, YouTube promised a generation of new digital stars that if they built their audiences with it, it would share in the riches through advertising revenue share. That promise ultimately broke down, leading to the birth of a new industry, as well as the opportunity for direct competitors to begin eating away at YouTube’s distribution monopoly.
Ironically enough, you can trace the origins of that broken promise to the very golden goose that enabled Google to snap up a revenue-less YouTube in 2007 for $1.65 billion.
AdWords—and, by extension, AdSense—is a direct-response tool built for a world with clean attribution lines. It matches consumer intent (either explicit via keyword or implicit via content) to advertisers that can convert it into a purchase. Usually, that purchase takes place within the same session, and more often than not on the same device.
Perhaps YouTube’s biggest misstep was assuming that it could apply a single-screen direct-response strategy to a multimedium upper-funnel platform.
YouTube is about influence and discovery, not keywords and conversion. People often cite YouTube as “the world’s second-largest search engine,” and while that may be true looking at pure volume, the intent behind those searches is fundamentally different than it is on Google. The fact that YouTube searches for “how to” related content are growing at more than 70 percent year over year points to that fundamental divide between its users and the classic I’m-ready-to-purchase Google searcher.
Related to that point, but significant enough to call out separately, YouTube also assumed that if it could own direct monetization of the platform, it would capture the vast majority of the value created by the platform. In fact, the inverse has occurred, perhaps best represented by the multichannel networks that have popped up to help connect YouTubers and other digital influencers directly with brands.
By now most marketers and consumers are familiar with influencer campaigns sponsored by progressive brands. Content is often bespoke, leverages the protagonist’s built-in audience and is more akin to brand advertising than direct response. For these high-effort, high-value impressions, AdSense is a terrible fit, and as a result, those dollars fled the platform. Before YouTube could respond, or perhaps because it was unwilling to, a new vibrant industry had formed, and the ground—and value—ceded extended beyond even YouTube’s reach.
The exclusive focus on the ad supported model also created openings for verticalized offerings like Vimeo, focused more on creative professionals, to step in and own a large, valuable customer segment.
An ad-supported model assumes that customers are unwilling to pay and, as a result, features tend to focus on the basics. By building a product tailored for a niche, Vimeo has built a subscription business that will generate more than $100 million in 2018.
That’s still a fraction of YouTube’s projected $27 billion in earnings by 2020, but there are numerous examples of where competitors were able to establish a foothold and erode YouTube’s distribution dominance. Snapchat, Periscope and Facebook have managed to capture share by focusing on live video and better interaction with fan bases.
Not even YouTube can be all things to all people, but the mismatch between the ad-supported model and the nature of video content continues to create disadvantages newcomers can exploit.
YouTube is not going anywhere, of course, and it has clearly cemented its place on the Mount Rushmore of digital video. While Google’s purchase of YouTube may have been a steal akin to Thomas Jefferson’s Louisiana Purchase, the failure to stray from a pure ad supported model in any meaningful way has given rise to powerful alternatives and broken the original promise to its community of creators.
Whatever happens next, we have its early dominance over distribution and many of its efforts to support the ecosystem in its infancy to thank for the creative revolution we all benefit from today.
And that’s something we should all toast.
T.J. Leonard is the CEO of VideoBlocks, a subscription-based provider of royalty-free stock video.
Image courtesy of dem10/iStock.