YouTube

YouTube Is Growing Up, Celebrates At VidCon In Anaheim

This post originally appeared on Forbes.com.

Español: Logo Vectorial de YouTube

 

YouTube has been around for a while but it’s finally becoming the transformational platform everyone thought it could and would become. Until recently, brands and businesses have written off the medium as a place for teenagers to film short, quirky, and often nonsensical short form videos. But something funny happened along the way. Many of these teenagers became overnight sensations which has people rethinking the power of online video.

Take for example Jenna Marbles. With about 10 million YouTube subscribers and over 1 billion video views, she has amassed a following most brands would be envious of. And there are plenty of others trying to follow in her foot steps by using YouTube as a platform to create a meaningful brand and personality. This week, many of these YouTube stars and celebrity hopefuls will converge in Anaheim, California for the VidCon conference. In attendance will also be other forms of professionals and they are ones you’d only expect to find in Hollywood: talent managers and entertainment agents. The talent and respective managers are both starting to realize that YouTube has completely changed the game.  And this trend is only increasing. According to Rolling Stone magazine, just last week Russell Simmons announced a brand new music label with YouTube and Universal Music  that would be focused on promoting and developing new artists using YouTube.

But music isn’t the only category that is taking advantage of the medium.

Major retailers, consumer packaged goods companies, and beauty companies, are beginning to partner up with influential YouTube bloggers in order to facilitate product placement within online videos. Companies like Stylehaul and HaulerDeals have been created to facilitate these types of transactions between product companies and video bloggers.

Media companies are starting to invest heavily in in-house video production and content creation, whereas just a few years ago they would argue that it was too expensive. However, after recently speaking to a number of executives at various media companies like Conde Nast and Hearst, it’s clear that they realize the time to invest in video is now. And with the costs of video production coming down due cheaper and better tools it’s starting to become a no-brainer for businesses to get into the video production game. Cameo.tv is one such example where videographers can film, edit, and publish a professional video without needing anything more than just an iPhone.

Even medium to small sized businesses realize that in order to do effective marketing and sales, you need to be able to tell your story in a meaningful and engaging way. And how much more engaging can you get than using site, sound and motion? This is the reason more and more businesses feature videos right on their home pages, and even about-us pages, instead of static text.

So if you’re thinking about building your own personal brand or adding fuel to your business, you should take another look at YouTube. It’s not just about teenagers and cute kitten videos anymore.

Monetizing YouTube and the Viral Effect

We used to live in what I will call a Media Dictatorship. A Media Dictatorship is a world where content is created by a few dictators (media companies), and as a result, those few dictators are able to charge a premium to advertisers for access to the eyeballs and ears of the people watching that premium content. This process is called television, radio, print, magazines, and newspapers. Think about the Super Bowl and Super Bowl commercials for a second. One night a year, content providers or dictators (the cable network hosting the Super Bowl) know that they will have an entire country watching their show, and as a result, they are able to charge a fortune to advertisers for a 30 second commercial. According to the Associated Press, a 30 second spot for the 2008 Super Bowl was $2.7M dollars. On this night, everyone knows that millions of eyeballs and ears will be tuned in, and so, advertisers are willing to shell out some big bucks for the opportunity to reach all of those viewers (according to a Nielsen report, there were 97.5M viewers of the 2008 Super Bowl). In this world, the world of a Media Dictatorship, the dictators own the distribution of the content, and therefore they own your attention.

Today we live in a very different world. A world that I will call a Media Democracy. A Media Democracy is a world where content is created by anyone, and as a result, those people are able to charge whatever they would like. However in this world, in this Media Democracy, the people that own the distribution do not force their content on the people (see Google). These distribution owners let the people choose what they watch or listen to and as a result, attention isn’t owned but earned. In order to accrue lots of eyeballs and ears, the content must be compelling and the people must be willing to share. And unless there are lots of eyeballs, it is very difficult for the people to charge advertisers anything at all. Consider that YouTube video that you loved, but only has about 100 views. Although the content may be awesome, 100 views is of little significance to big brand advertisers. Now consider that YouTube video that your friend told you about. The video that you would of never heard of had that friend not said anything to you. Turns out, this video has 100M views. Guess who made money off of this video? No one. There was no $2.7M commercial for 30 seconds. The video itself was only 55 seconds, and yet for 55 seconds, this video had the attention of almost 100M viewers.  This was a mini Super Bowl event that happened organically, grew virally, and was controlled by no one. A true democracy.

Welcome to the new age of the internet. Open, distributed, democratized. More specifically, welcome to YouTube. At any given point in time a video could experience a Super Bowl-like event or what I rather refer to as a Black Swan event.

There has been a lot of talk recently on how to make money from YouTube videos or User Generated Content (UGC) videos, especially after seeing YouTube’s inability to make money off of the recent pop sensation Susan Boyle.

As Simon Cowell might say, this story is utterly disappointing and self-indulgent. But the fact that YouTube and ITV have been unable to monetize the Internet sensation that is Susan Boyle is a rather significant blunder, and highlights some of the archaic ways that business is still done between old and new media. – Mashable, Susan Boyle Video Profits: $0

In the Media Dictatorship, media companies know with good certainty how many viewers they have. In the Media Democracy world, no one knows with any certainty how many viewers there will be. In lies the monetization and advertising dilemma with UGC videos or anything viral online. How do you make money off of videos that MIGHT be huge successes? How could an advertiser possibly know what videos are going to be a hit and go “viral”?

Bottom line: They can’t.

So now what? We know there is a ton of potential in videos that have millions of views, but the question still remains:

In a broad sense: How can advertisers capitalize on media that goes viral?
Solution: Selling dynamic advertising access based on first order traffic derivatives.

In a specific sense: How can advertisers capitalize on viral YouTube videos?
Solution: Selling dynamic advertising in YouTube videos based on the growth rates of video views.

Imagine for a second that an advertiser has the ability to place an advertisement (overlay, video ad, pop up, etc) in a YouTube video at any given point in time during the life of that video. For all intents and purposes, an advertiser can throw an ad in a video, however they want, whenever they want.

  1. Would the advertiser place the ad at the beginning life cycle of the video? Do they try and intuitively gauge how successful the video might be? Would you put up $3M on a video that may or may not be seen by more than 100 people?
  2. Would the advertiser place the ad at the end of the video’s life cycle? After the video has been seen 100M times? Would you put up $3M on a video that may or may not have peaked in popularity?

The answer is no in both examples.

The real solution here is to place that $3M on videos that:

  1. Meet the advertisers target audience (the type of video: comedy, horror, sports, etc)
  2. KEY: Have the highest growth rates for a certain period of time.

By inserting advertisements into videos that are experiencing the highest growth rates, marketers could benefit from the “viral” effect of videos. The $3M would only be spent as the video increases in popularity. The video will no longer be judged based on “top rated” or “most viewed”, but instead, will be judged and purchased by marketers based on “most growth” (The interface might look something like the image below).

Ultimately, if marketers are to capitalize on the “viral” effect they must start to look at the viral aspects of media or videos, and buy them according to their growth or “viral” potential as the growth is happening.

growthratemockup

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Dear Ambassadors and Respected Representatives of UW-Madison and Education

In the back of my mind I’m always thinking about education and change. Below is an open letter written to some faculty members of my alma-mater about the importance in recognizing that change.

(Before reading this letter, please note that I will be making this letter publicly available on my blog. Also, kindly take note of the recipients.)
To: Chancellor Carolyn Martin – chancellor@news.wisc.edu
To: Provost Julie Underwood – junderwood@wisc.edu
To: Director of Admissions, Steve Amundson – samundson@uwmad.wisc.edu
To: Dean of Students, Lori Berquam – lberquam@odos.wisc.edu
To: Senior Policy and Planning Analyst, Hazel Wade – symonette@bascom.wisc.edu
To: Associate Dean of Students, Argyle Wade – awade@odos.wisc.edu

3/31/2009
Dear Ambassadors and Respected Representatives of UW-Madison and Education,

I am writing to you out of extreme concern for the future well being of my alma-mater and your home, UW-Madison. The admissions process, curriculum structure, and speed to iterate are overwhelmingly frustrating and alarming. The arguments and issues addressed throughout this letter only reflect my first hand experiences, but I firmly believe these issues are far-reaching and not specific to UW. Nevertheless, these issues exist and must be addressed, or at the very least, must be thoroughly considered. By way of introduction, my name is Dan Reich and I am a recent graduate (May 08’) from UW-Madison’s College of Engineering (Electrical). During my four year tenure at UW, I was able to accomplish some great things, including but not limited to:

Additionally, I have a younger brother Jeremy who is currently enrolled in UW’s school of business where he is double majoring in real estate and risk management. I also have a younger sister, who I would like to say is also a legacy, but was recently rejected by the UW admissions office. A sister who admittedly did not score as high as she could have on her SATs, but did have excellent remarks in school, as well as other critical skill sets and experiences (she also attended UW’s summer program). This is an individual who if assessed in relation to her peers, in my objective estimation, is a stronger candidate for success than most. Nevertheless, I believe the admissions process is critically flawed and this belief is not exclusively dependent upon my sister’s recent rejection.

While I believe the admissions process in general could be significantly improved, (which I’m more than happy and eager to discuss with any admissions officer at UW at any point in time), I will start my focus on the issue of networking in light of recent events.

As an individual who is currently working in a digital media and technology startup company specializing in social networks, emerging trends and technologies, I understand the importance of networks. Networks are literally changing the world. We see it happening everyday as companies like Google, Facebook, LinkedIn, Etsy, Twitter and others utilize the power of what Mark Zuckerberg calls “elegant organization.” When a single node is affected on a network, those directly tied to that node, piece of information or person also feel a change. The connections are what is most important. So, how does this have any relevance to the admissions process?

UW-Madison, as well as other schools throughout our society, should know this answer better than anyone else. Since 1848, UW has been building a super network of students and alumni. Every year UW graduates about 10,000 students who go on into the working world thus strengthening the badger universe. These are people who are ambassadors to the UW brand and are lifelong members of the network, and additionally each member has numerous other networks that are additive in value to the primary group: what we call Badgers.

Now you might imagine what I was thinking when I heard that my sister was not admitted into UW. A school that had endured not only my sweat, blood and tears, but also that of my brother. A school in which I had given money, time, but most importantly, a tremendous amount of value through conversation and action. So again, when I heard that my sister did not get into UW, you might think my reaction was “Why didn’t she get in?” but instead, my reactions were:

  • Why is the school degrading the network it has worked so hard to build?
  • How do you review applications? Why do you do it that way?
  • Doesn’t the school consider an applicant’s legacy within the school, and more importantly, their track record (I had a 2.5 GPA first semester and graduated with honors)?
  • Why didn’t I get a phone call from the school saying, “Dan, we just wanted to take the time and let you know that your sister did not get into the school?” or “Dan, if you and your sister are willing, we would be more than happy to go over why she wasn’t accepted?”
  • Why would I want to continue to support an entity that I believe has poor judgment?

In one phone call, you could have showed that you still care about your network in a very personal and meaningful way. Instead of strengthening your network, you weakened it.

How do you expect to compete in a rapidly changing world using obsolete methods and practices? Students are beginning to realize getting a “degree” is less valuable than getting practical, real world work experience. They can take courses online and learn what they need to learn with companies like Phoenix, Kaplan, BigThink, Academic Earth and even YouTube. Why spend $500/semester on books when I can get the same information free online? Why would students want to pay full tuition to an accredited university when at the end of the day they are taught linear algebra by a teacher’s assistant that speaks poor English, makes continual mistakes (which were witnessed by a head of department), and has inconsistent grading (this happened to me junior year. That semester I had a 4.0 GPA until given a C by a TA)? Why implement practices that have students cramming for exams instead of using methods enabling true adoption of the material (I wrote a piece about this on my blog entitled, The University of Nothing. This post received over 60 comments from various communities and sites, and the consensus was that current education systems are in trouble. I’m also willing and eager to discuss this point further with any faculty member. In fact, I had this conversation with one of my engineering professors when he asked my opinion on “why the enrollment in engineering was decreasing.” He was giving a presentation to his peers on this very topic).

In any case, this letter is not intended to bad-mouth or criticize current practices at UW. It is however intended to act as a wake-up call. I only and respectfully ask two things:

  • Please reconsider how you value your network and remember that we among the network are all ambassadors to UW-Madison. We are your most valuable asset.
  • Please reconsider how UW-Madison can take the lead and become the most efficient and attractive educational institution of tomorrow. The world is changing and so should you.

Again, I’m happy to speak to anyone and everyone about these issues. Please feel free to leave comments on my blog or send me an email at reich.ny [at] gmail [dot] com. I most welcome a phone call and conversation.

My Very Best Regards,

Dan Reich

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