Youtube's March To profitability in the Fourth Quarter of 2012AD - Digital Video and Music Piracy of the Caribbean On stranger Tides

Albeit I am a big fan of Google, the lack of polish in many of their product leave much to be desired, such as Google Docs, which is slated to get an upgrade as an Offline Storage option on the same level as DropBox as stated in my blog article entitled “Google Docs rebranded as a Cloud Storage Option – Johnny Mnemonic gets an Upgrade”.

Being a former Telecoms Technician and a DIY (Do It Yourself) advocate, I still dislike having to fiddle with things, especially if it’s software albeit I don’t mind fiddling with hardware. But I like YouTube, the No. 2 Search Engine after Google based on the article ”YouTube garners most Video views”, published Monday August 16, 6:41 pm ET, Yahoo News.

Plus YouTube, like Android, was a smart US$1.65 billion acquisition made in 2006AD as stated in “At YouTube, adolescence begins at 5”, published May 16, 2010 11:06 PM PDT By Brad Stone, The New York Times, CNET News.

Now six (6) years old then, they have introduced a slew of new products, moving from being a great place to post LOL Cat Videos to a professional Video Website.

Some of their most noteworthy achievements include:

1.      Partnerships with four (4) Music Labels for Video Content on YouTube via the VeVO  Channel

2.      Advertising partnerships with Content Uploaders, which have seen a steady rise in revenues to cover operational costs

3.      Partnership with the ICC (International Cricket Council) to bring the IPL (Indian Premier League) cricket matches streamed live

4.      Integration of educational Video Content in Google search results

5.      Deals with media partners such as Time Warner as stated in the article “Time Warner, YouTube ink distribution pact”, published August 19, 2009 12:34 PM PDT by Larry Dignan, Digital Media, CNET News  to bring more short form Content in exchange for a share of advertising revenue

Albeit they are yet to make an after-tax profit, Citi Analyst Mark Mahaney as mentioned in the article “YouTube Will Be a $1.3B Business in 2011: Report”, published March 21, 2011, 12:35pm By Ryan Lawler, GigaOM has nothing but love for YouTube, apparently impressed with their increasing profitability, quote:  “Over time, we have become increasingly impressed by the size and growth of Google’s YouTube asset. Further, we view YouTube as giving Google a great platform against two of the biggest trends on the Internet today – the Migration of TV/Video Ad Budgets to the Internet and the Rise of Social Networks, specifically Facebook. Put it this way, we believe that Google’s long-term value would be materially less if it didn’t own YouTube.”

Those are some serious words supported by some solid stats, which indicate that 2012AD may be the year that YouTube may finally turn a profit. According to Citi Analyst Mark Mahaney:

1.      In 2010AD, revenues before removing the Media Content Partner’s share were approximately $825 million

2.      Revenues are projected to grow to $1.3 billion in 2011AD and $1.7 billion in 2012AD

3.      In 2010AD, revenues after removing the Media Content Partner’s share were approximately $544 million

4.      Revenues are projected to grow to $876 million in 2011AD and $1.1 billion in 2012AD

The balance sheet below should make this abundantly clear, for those accounting types:

This increase in profitability is due to Google making the right partnerships with Content Providers to appease their litigious urges and then monetize the inbound traffic to their Video Search Engine and share the profits with their new Business partners.

The increase in revenues is a result of overall increased views of Videos on YouTube, but also from the company’s ability to better monetize those views with high-end high-quality advertising. Mahaney notes in his report that Citi’s YouTube Ad Tracking Analysis found:

1.      81 of the top 100 Videos on YouTube had advertising in them in March 2011AD

2.      77 of the top 100 Videos on YouTube had advertising in them in December 2010AD

3.      60 of the top 100 Videos on YouTube had advertising in them in March 2010AD

In terms of advertising, the numbers are also encouraging:

1.      95% of Videos in 2009AD had only one (1) ad

2.      63% of Videos in 2011AD have two (2) or more ads

3.      37% of Videos in 2011AD have one (1) or more ads

Originally, these ads were Google Adsense Ads, a source of revenue for Jamaicans who also upload Music Videos and other Content to YouTube. Now, YouTube is forging direct partnerships with companies to directly advertise for them, with brands such as AT&T, Verizon and Amazon being among those who choose to advertise on YouTube.

So how can YouTube, thus far Google’s major success story in Social Networking finally achieve profitability?

One idea is to incorporate aspects of Google Instant into YouTube to make Video searches faster, the so-called YouTube Instant API developed by Stanford University Student Feross Aboukhadijeh as reported in the article “'YouTube Instant' creator finds instant fame”, published September 13, 2010 4:00 AM PDT by Michelle Meyers, CNET News who has earned a job offer from one of YouTube’s founders and CEO Chad Hurley.

Another is to index the entire listing of Video on the various Video Sharing websites and make them searchable on YouTube, again a partnership that many Video websites would find attractive. Locking in exclusive Video Content to YouTube is also another way to monetize on YouTube Videos.

But a more interesting concept may be the most obvious: Monetizing Video downloading. Despite being tantamount to supporting Digital Video and Music Piracy, Google can monetize this by having Content uploaders agree to include advertising embedded in their Videos streams. Once a download is detected to be in progress, the ads are added at the beginning and the end of the Video, much as is the case with Videos viewed on CNET’s Video Webpage.

YouTube can also partner with Video downloading software makers such as YouTube Downloader and SoThink Web Video Downloader for Firefox as described in the article “How to Download YouTube FLV with Firefox Video Downloader?”, viewed November 6 2011 by Lindsworth Deer, So Think Media.

Via such a partnership, these YouTube Video download software makers can generate tracking reports of Video Content downloaded by users in exchange for a shared of Google lucrative advertising revenue. This would create a seamless end-to-end way of making revenue from Video downloaders.

Combining the statistical Data from Videos having advertising Content built into them and tracking assistance from Video Downloading software companies, YouTube could track who watches which Video and their associated advertising and thus make real-time analysis of the statistics. Thus, YouTube would be able to make better decisions as to which Videos on their website should have certain advertisements.

Visitors to YouTube may react negatively to it at first, but Content uploaders would be all for it, especially as such an initiative would mean that they could continue to make revenue even when their Content is downloaded from YouTube. This would result in more uploads, as there would be less fear of Digital Video and Music Piracy if one knew that one could still make money from both advertising as well as advertising from downloaded Content, which is really piracy.

If YouTube does the above, they can monetize Digital Video and Music Piracy on YouTube and thus achieve their long sought milestone of profitability by the Fourth Quarter of 2012AD.

YouTube, not Google+, would be Google’s real Social Networking contender against Facebook, being as the Social Network is also a source of uploaded Video, Audio and Pictures.

All by simply befriending the Pirates of the Caribbean: On stranger Tides (2011)!