“Demonetization” means that YT took away the ability of certain videos to run ads because they were deemed unfriendly to advertising. This action (as I will call it) affected a huge range of channels, including a large percentage of YT stars: they found that a number of their videos could no longer run ads; ergo, they could no longer make money off those videos. There is an appeal process, but it requires the channel manager to go video by video, requesting an appeal for each. The criteria for deeming a video non-advertising-friendly are broad in the extreme, ranging from using curse words to talking about controversial topics.
This was a big deal and a big mess. I’d first like to challenges some of the assumptions, explicit or implicit, that I tended to see in the discussions (mainly in the form of YT videos about the issue–there are many). Then I’d like to talk about why YT’s business model is doomed (the site itself is part of Google, of course, and they aren’t going to take it down anytime soon, but the YT we know and love will probably not last much longer).
False assumptions:
- YT is competently run. People have tended to talk as though, while YT’s intentions with the action were unclear, it was acting rationally in its own interest as a business. People did correctly complain that the action was not a good idea and provided reasons, but few accused YT of simple stupidity or incompetence beyond noting the obvious fact that communication about the action was highly inadequate. Close to nonexistent. This is part of a larger tendency to revere large companies and assume they are competent.
Actually, companies do dumbfuck shit all the time. There are big failures within even the biggest companies eventually, including Google, Apple, Microsoft, you name it. The action seems to my eye careless and incompetent on multiple levels. For example, I have no reason to believe that market research was performed to ensure that advertisers in the aggregate even wanted the action. I have no reason to believe that the action will positively affect YT’s bottom line (not loading ads on popular content means less money from advertising, right?). And so on.
- Online advertising (as it currently exists) is a good/necessary/respectable thing. In their video about the action (not really worth seeing, so I won’t link), the Young Turks annoyed me by basically kissing YT’s anus and saying they understood why YT was doing this, they need to make money, blah blah (again, assuming competence). YT’s ad system is an abortion, just as are ad systems on the vast majority of websites. Their rate of annoying users is close to 100%, and their rate of not making the websites enough money to be profitable is not far from that figure as well (I will discuss YTs profitability in a second).
No one has ever liked online advertising. Anyone who fails to use an ad blocker out of ignorance is, well, ignorant, and anyone who doesn’t use one out of pity for the “content providers” is being an idiot: Forbes asked readers to turn off ad blockers then immediately served them pop-under malware. I never see ads on Facebook or YT. I have no idea why anyone else does. Oh, and by the way, I work in the advertising industry. And I still hate that shit and won’t tolerate it.
Intrusive advertising is accident of history based on where society was at in the 30s-50s (i.e., naive about media and technology and so hungry for anything new and exciting that radio and TV ads themselves seemed interesting and were thus tolerated). Companies still want to believe that people accept the deal of being peppered with ads so long as good content is being provided. That was never a deal that people ought to have accepted, and as a revenue model it is a dead man walking. Even commercial TV is in danger of collapse at this point. (Advertising rates are the same as they were in the 90s adjusted for inflation, but the most popular scripted show now would not make 1994’s top 50. That is, TV advertising delivers only a fraction of the eyeballs per dollar it did 20 years ago, but this harsh reality is tolerated because it is virtually the only advertising medium that still works.)
- Hi, Opal!
Now let’s talk about why YT’s business model is going to fail. First things first: YT doesn’t make Google money. That’s from 2015, but I haven’t heard anything different in the interim.
Even if YT were breaking even or slightly in the black now, that’s not good enough. Why? Because it is a massively expensive business to run. It had $4 billion in revenue in 2014–but also about that much in expenses. Compare two businesses you could run: 1. You take in $50,000 but have $49,000 in expenses. 2. You take $500,000 but have $499,000 in expenses. Both are shit but #1 is far less scary to run: if things start to go south, you might be out $5k, $10k but could recover. In the second case, if things go south, you might be out $50k, $100k and might not recover. “But what about the upside?” you say. “#2 has a lot more throughput; you could build on that.” Maybe. But in the case of YT we’re talking about a business that is now 11 years old… and still not making money.
And we’re not even getting into bean counter shit like return on assets. YT has a shitton of assets behind it: it takes a lot of servers to house the world’s cat videos.
To me the demonetization action was YT tipping its hand. Showing its weakness. It was saying, “We have to adjust this business model because, yeah, we’re not making money, but we gotta make money somehow. So we gotta do something.”
So it would be hard to argue back that YT is doing well, but that doesn’t mean it’s business model is doomed, does it? It means something close to that. Google is supposed to be super-smart. All them smart kids went to work there. Videos are popular. Any reason not be profitable after 11 years? Any in particular?
But I would add that there are several trends that are not in YT’s favor that will take them from breaking even (at best right now) to “oh fuck”:
- Very few YT stars make serious money. The demonetization action was just so dumb… “Hey let’s disincentivize our content creators even more!” Further, I have heard that the golden age is over and now it’s extremely hard to get a successful channel up and running. Without the incentive to create content, it won’t be created.
As a case in point, take the channel Break, to which I subscribe. Currently 2.9 million subscribers, but I have seen this mofo collapse (in terms of content offered) in real time. Until about a year ago, they were putting up a lot of high-budget prank videos. They had a very popular dude named Kevin in these videos. He disappeared (reason unknown), and they tried some other people. Content has sputtered to a virtual halt with an occasional prank video and some old school fail videos. Quite the sad state of affairs, and who knows what’s really going on. If a channel that popular and that loaded with subscribers can no longer produce content, what does that say about the future of YT?
- We’re at Peak Content anyway. This is true of the Web as a whole, but I am seeing redundancy of content and content fatigue in general. Concretely speaking with respect to YT, prank videos, until recently a highly popular form of video, seem to have collapsed. They have justifiably been called out as fake and antisocial. In addition to Break, the mostly prank channel Whatever (3.3 million subscribers–wow, that is above Break now–the latter must have lost a LOT) has basically quit releasing new content.
Don’t get me wrong, there will always be new content and new types of content. My daughter and I were laughing like crazy at Chadtronic today (hilarious reaction videos). There is always something to watch. But that doesn’t change the fact that a lot of the low-hanging content fruit has been plucked, and there is a lot of supply for any money-making content type. If supply outstrips demand, then people can’t get off the ground with their channels. The total amount of content keeps rising, but stars are NOT born, which deincentivizes (yes, I said dis- a moment ago) long-term content creation. And content fatigue reduces overall views (anecdotal data point: I read a far lower percentage of Cracked.com articles than I used to: they just tend to be about shit I’ve already read or about topics I’ve gotten tired of reading about. I also don’t watch many challenge videos any more: there are only so many times seeing someone eat a ghost pepper or Surströmming is funny).
- Competition. It seems that everything used to be YT content, direct or embedded. Not so any more. You have Vimeo, and a lot of sites are now just hosting their own content and trying to make money off that, such as Comedy Central. Screen Junkies maintains a YT presence but opened up their own subscription-based website (which I have some doubts will succeed in the long run, but that’s essentially the way to go). In a lot of ways, using YT to host your content is stupid. You give up a lot of control in return for inclusion in what is, at the end of the day, a glorified search engine and set of bookmarks.
This trend has the potential to be the death of a thousand cuts for YT. The more people get used to going to individual sites (such as Comedy Central and Screen Junkies), the more they… go to those sites. The YT habit gets broken, and more content creators are encouraged to strike out on their own. With the demonetization action, I have no doubt that several YT stars will jump ship.
- Have you even heard about YouTube Red? Even if you have, does it seem like a thing?
I could also entitle this point, There’s no upside. YT doesn’t have any new or exciting ideas, and its subscription service YouTube Red (which people aptly pointed out sounds like a porn tube) seems about as lively as a stillborn goat. The cool thing about YouTube Red is that you don’t have to watch ads! Oh wait, I use adblocker anyway. Oh but there is exclusive content! From which they are (have? still do? don’t know) removing the view counter so people can’t tell how bad it is all tanking.
- It only gets more and more expensive to run as is. What was the stat I read? People upload 400 hours of content to YT every minute, I think it was. In any case, it’s an absurdly high figure. Do you think YT is going to want to host blurry cat videos from 2006 forever? Endless copies of pop songs (especially now that streaming is a reality)? All the useless content that people throw up that no one watches? Hell no. It’s not physically possible or fiscally prudent. Something has to give.
That’s about it. I don’t see any positive trends with YT. The aforementioned action seems like panic paddling to me. Thoughts?