YouTube: 10 years old and still the kid to beat, but faces uncertain future


  • Living
  • Thursday, 30 Apr 2015

Screen capture of the first video ever uploaded to YouTube, on April 23, 2005. The video featured co-founder Jawed Karim talking about elephants at the San Diego Zoo. Photo: Youtube

Ten years after its launch, YouTube has become a household name for online video but faces an array of rivals in the market and lingering questions about its business model.

The first video uploaded April 23, 2005 – an 18-second clip of co-founder Jawed Karim at the San Diego Zoo – offered little indication the service would become the leader in Internet video and a key part of the Google empire.

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A decade later, YouTube has more than one billion users, with localised service in 75 countries and 61 languages.

Some 300 hours of video are uploaded to YouTube every minute, and "every day people watch hundreds of millions of hours on YouTube and generate billions of views," according to the YouTube statistics page.

Google is reserving its 10-year anniversary celebration for May 10, marking the day the site went public, according to a spokesman. But analysts and others are already talking about the milestone.

"Everyone in the world knows YouTube, even my mum," says Dan Rayburn, analyst at Frost and Sullivan who also writes a blog about streaming media.

YouTube played a key role in the Arab Spring uprisings and other political movements. It has faced bans in some countries, notably for the distribution of a film about Muhammad which offended some Muslims, and has faced criticism for being used to distribute unauthorised copyrighted content.

Making money from online video

Even though YouTube is immensely popular around the world, Rayburn contends that it’s still unclear whether YouTube has a real business model.

Google bought YouTube in 2006 for some US$1.6bil (RM  in stock - raising eyebrows about what was then the Internet firm's biggest acquisition - and now generates considerable revenue, but also has high costs.

"Even today, Google will not say if YouTube is profitable," notes Rayburn. "But 90% of analysts say it is not profitable." Rayburn adds that even though YouTube popularised the idea of online video, the videos are mainly "user generated content" that does not attract revenue from users or advertisers.

"To stream premium content like films and television programs, people go to Netflix or Hulu or iTunes," he says. "YouTube has struggled to find its core business. The vast amount of content on it cannot be monetised."

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Nevertheless, a report by Morgan Stanley analyst Benjamin Swinburne released earlier this year claims that YouTube is "a high-growth, valuable asset" for Google with tremendous potential.

The report says YouTube generated some US$4.7bil in revenue in 2014, and that it can do even better by investing in premium content -- such as the paid video channels it recently unveiled and other kinds of subscriptions.

"Given Google's hefty resources, we have been surprised it has not been willing to invest more directly in premium content," says the report.

The research firm Trefis says in a recent report that YouTube represents about 3% of the value of Google but that its importance is growing. "As the explosive growth in online video ads spending continues, YouTube will be able to leverage its popularity to buoy Google's revenue going forward," says Trefis.

Challenges ahead

YouTube may be the most recognised name in online video, but it’s being challenged on all fronts Amazon, Hulu and Netflix and Time Warner's HBO for "premium" paid content, and services such as Facebook for free uploads of user videos.

"YouTube has to decide what they want to be," says Rayburn. "Do they want to be a place where anyone can upload stuff"

For the present, Google appears to be happy to leave YouTube as it is, consistent with the philosophy of the California firm.

"The Google mantra is to help the world and allow anyone to upload anything. They want to keep everything free and open," says Rayburn. "I don't think Google wants to monetise all of that.” – AFP/RelaxNews

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