YouTube – a social phenomenon and a household noun. In the past year it has been deemed the king of online video sites as well as proof of our fast-paced and electronically connected society. This public video-sharing website caters to amateur content (video blogging and short films) as well as large corporations issuing marketing ploys and multimedia segments, and it has spiked the desire to share, upload, and view videos for anyone with access to a computer. Whether it is highlights from the latest elections, real footage of natural disasters, or home videos about kittens, YouTube has it all.

This post is the first in a series of YouTube investigations. Due to its cultural dynamics and social media influences provided for your public viewing pleasure, it certainly warrants more than one blog.

So YouTube has successfully established an anchor to tie down our generation’s humor and education, but how do they continue to have the ability to do so? This presents the question at hand. What bank did they rob?

Just like most public websites, the money is in the ads.

Now of course there’s the business of the small initial start-up fee of $1.65 billion provided by Google when they purchased the site in 2006…but who’s counting? That chum change is referred to as the “venture capital.” Luckily for Google, the venture capital was paid off by the last 18 months of total video-viewing domination. The venture capital is mostly used to launch a new Internet endeavor, but occasionally it can feed into the first couple months of taking flight.

According to market research data posted by comScore, YouTube is now the premier provider of all online videos in the United States. They control a market share of around 43 percent and more than 14 billion videos were viewed in May alone. They are evidently no longer “taking flight”.

However, who cares if every person in America is hitting your website seven hundred trillion times a day if there are no revenues being revoked? Eric Schmidt, Google CEO, said on YouTube strategy, “an audience first, then figure out the tools that will create the revenue.” This is where advertising comes into play. Because there are over two billion videos watched on YouTube every day, small time advertising will no longer cut it. YouTube has had to invest in endorsements from companies such as Fox, LG, Ford, and countless others. So they do care about the website hits, because this popularity is what brings in the big guns who want their advertisements seen and who will provide YouTube with the funds to make it happen.

Google purposefully does not post these “funds” online, but rumor has it that YouTube is anticipated to earn around $450 million this year. The site has also doubled each year for the past three years, so this anticipated revenue is only the beginning, it certainly still has a way to climb. Although it seems like a significant chunk of cash, it will be barely noticeable compared to the vast amount that Google contracts annually. It will climb though, according to Schmidt, who stated in a NY times interview, “YouTube is a big component of our display revenue, and display is our next business.”

In reference to display advertising, one particular advertisement has embraced the vast possibilities that YouTube marketing has to offer, and their ad will surely be a pathway to many more in the future. The Tipp-Ex ad found here depicts a hunter being chased by a bear, and gives the audience an interactive approach of whether to shoot the bear or not. (There is some flavorful language at the beginning so tread carefully!) Within this YouTube ad, the “liquid white paper” company uses their product in a comical and interactive way that has already achieved around 7 million views. If nothing else, Tipp-Ex showed advertisers that fresh innovation isn’t out of style.

According to Advertising Age, 94 of the top 100 advertisers are now using Google’s public video sharing website as a way to advertise their brands. These 70 companies are actively purchasing advertisements in categories such as:

  • in-video overlay advertisements
  • ads at the bottom of videos
  • branded channels
  • interactive banner ads
  • contests
  • mastheads

…and more of what YouTube has to offer. The main reason for these top companies investing their advertising money into YouTube is the page’s indisputable popularity. With 15 hours of video being uploaded every minute and 100 million visitors per month, who wouldn’t want to slap down their advertisements onto an overwhelmingly fashionable YouTube page?

The Economic Times posted that YouTube has also been gradually adding in more professional content to attract an even wider audience. Full-length television shows and movies are slowly infiltrating the site as well as live TV which launched September 13th. This can only advance their influence over advertisers.

In conclusion, the website that we have all come to love is finally making money! As the 4th largest Internet domain, the only direction they have to go is up, and now they have some green paper to cushion the move.