YouTube’s Latest Move Signals Increased Commercialization

Increasingly, the YouTube you once knew is being transformed from a video repository into a commercial enterprise. It was inevitable, of course.

YouTube’s latest move is only the latest example of the way in which the Google site is desperately seeking novel ways to increase its revenue. YouTube already has ads that run at the top of the page when a visitor first arrives, although the visitor does not see the ad each time he returns to the site.

Now, YouTube is using that same model and applying it to individual videos, according to the New York Times. YouTube is offering a program to advertisers called “First Watch” that shows an ad before a video even starts (known as “preroll”), but only plays on the first view of the video. As of now, YouTube says, First Watch will be used exclusively with its partners – content providers who use YouTube for professional content – not with user-generated video clips.

Baljeet Singh, who has the very appropriate title of Senior Product Manager for Video Monetization, tells Stuart Elliott of the Times that since the home page ads have been so successful, “we started thinking about how we could extend that offering to advertisers.” He says tests of First Watch resulted in click-through rates of about 1 percent, which is promising for advertisers like Tommy Hilfiger, Hotels.com, Lifetime cable, Macy’s and Virgin Mobile, all of whom have participated in the First Watch tests.

Macy’s has just used First Watch beyond the testing stage to promote its contest, “Macy’s Million Dollar Makeover With Clinton Kelly.” Macy’s used a 15-second ad to invite viewers to tune into the final episode of the contest on YouTube at a specific time. It was a new advertising approach for Macy’s, who wanted to reach 25 to 54-year old females.

Once again, YouTube has proven to be a little late to the social media ad game, having lagged behind Facebook and Twitter in their monetization initiatives. But an examination of YouTube’s recent commercially oriented actions suggests the web’s leading video site is stoking up its revenue generation. Note, for example, the movies now being prominently featured for rent on the site’s home page.

It’s interesting to watch YouTube’s march to monetization in light of such developments as Facebook Deals, the recently implemented digital paywall by the New York Times, and Amazon’s Kindle with ads, all of which I’ve commented upon in past posts. One could argue that these organizations risk losing some of their loyal users by polluting a social network, newspaper, or e-reader with bold-faced commercialism. But the reality is no public enterprise can be successful for very long without generating revenue.

That’s why YouTube can no longer hide under Google’s umbrella. Now facing intense competition for online video supremacy, YouTube cannot continue to bleed its parent. It needs to prove it is a commercial venture, pure and simple.

There is, however, a big question that remains to be answered: Will the commercialization of YouTube fundamentally change its DNA?

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

Website: http://www.barrysilverstein.com