
Lessons Learned from YouTube’s $300M Hole - replicatorblog
http://edwardspoonhands.com/post/46305605617/lessons-learned-from-youtubes-300m-hole
======
sophacles
Completely unrelated: 13 paragraphs, 4 of which are single simple sentences,
and the longest of them is 72 words, qualifies an apology for "wall of text"
now?

This makes both very sad and very angry.

~~~
mvarner
This was posted on Tumblr, which is generally known for its short attention
span, and the blogger has a large contingent of younger fans, who may not be
interested in reading about Youtube and would prefer to continue viewing cute
cat gifs.

That being said, I didn't realize that YouTube was funding original channels!
I'm reminded of the talk Dan Harmon (creator of the television series
"Community") gave regarding the death of television/the Internet as a new
platform for stories [1]. The majority of people already consume television
shows on the internet, I'd love to see a larger shift towards an internet-only
tv series model.

[1]
[http://www.youtube.com/watch?feature=player_embedded&v=e...](http://www.youtube.com/watch?feature=player_embedded&v=ej_aFOnT04g)

~~~
untog
That's never easy, though. Just like newspapers before it, TV show creators
will discover that internet advertising doesn't attract anywhere near the
premiums of TV advertising.

So you have to find alternative revenue streams, which isn't always easy.

~~~
faboo
I've wondered for a while if the price for television advertising was/is
inflated due to the fact that there's no way to track its impact. Web
advertisements usually pay per click these days, which at least measures
_some_ kind of engagement, and yet advertisers apparently pay significantly
less for it in aggregate than they do television advertising, which seems
backward to me.

------
inkaudio
Quality matters everywhere, quality matters on T.V. and online. 300 million is
like the budget of a handful of popular T.V. shows. Game of Thrones has a
budget of about 60 million a season, House of Cards cost about 100 million.
300 million spread across hundreds of channels is not going to give you the
best of T.V. The T.V. networks make big bets on a smaller number of shows.
Time Warner alone has over a billion dollar budget for their content. It’s
really high risk, high reward for them and I don’t think it is something
Google is ready to stomach. The budget would have been better spent on more
educational programming, which T.V. channels offer very little of. Educational
programming is popular on Youtube and other sites.

~~~
rdl
Most of the channels were educational or news or other special interest, not
sitcom, drama, etc.

I think the issue is just cost -- high-end TV is $250k-3mm/hr . Low-quality TV
costs something like $30k/hr of finished product. High-end web is $1-4k/hr.
Amateur is $100-400.

You can produce much more niche content if you need only $1k/hr to produce it.
Niche reduces the cost per hour for the same quality, too -- I'd rather see
dmor or sama or garry talking about startups for 15 minutes vs. Morgan
Freeman. Non-talent costs really can be dramatically reduced in a non-union
world, especially one where the principals are compensated through equity or
other non-cash, for the same final quality. And, if something is niche, I'll
watch it even if the editing, sound, video, etc. aren't quite up to the same
level.

~~~
inkaudio
-> Most of the channels were educational or news or other special interest...

There was a lot of news and special interest but throwing Educational
programming into the mix is not factually correct.

I have two list, one from 2011 and one recent. Both show an emphasis on
Entertainment and Extracurricular programming.

Recent: <http://www.youtube.com/yt/advertise/original-channels.html>

From 2011: [http://www.tubefilter.com/2011/10/28/youtube-original-
channe...](http://www.tubefilter.com/2011/10/28/youtube-original-channels/)

Not too many pure educational programming plays. Certainly not the majority.

->Non-talent costs really can be dramatically reduced in a non-union world...

Producing content is like anything else you have to make, a lot of times you
get what you pay. I've worked with a lot of new workers, the good ones rise to
professional level pretty fast and they won't work for equity/portfolio for
too long. I think Youtube has gone as far as it can go with cheap content,
which is pretty good. Now they are experimenting.

~~~
rdl
Ah, great list.

I would consider a lot of the science/food/tech/automotive stuff as
"educational entertainment" to the extent that the Hitler Channel and other
cable tv programming is educational. But there is not a single thing there I'd
personally watch.

(The only YouTube content I love, personally, is Hickok45, MrColionNoir, etc.,
and cat videos. I'd love curated high quality cat videos. I'll probably get
some cats and a 4K RED or Canon just to have an excuse to produce this.)

------
ohwp
To me the message here is: it's all about content.

And a lot of people underestimate this. A beautiful website without good
content is worth nothing (well maybe it's worth inspiration for designers). A
newspaper without content is worth gossip and sensation.

That's why some blogs are better than high profile newspapers and that's why
some home made Youtube movies provide more information (and are thus better)
than big money productions.

~~~
ziadbc
It was really the exact opposite of that. The thesis was exactly that, it's
all about the content, so get the best content creators in the world. It
turned out to be all about the medium, and there are still only a few people
who know what do in the medium of online video.

~~~
ohwp
Maybe I read it wrong, but to me it sounded like: we got the best content
creators, but they only could make beautiful content. All the amateurs were
creating the best content.

------
mattryanharris
Never thought I would see Hank Green on the front page of HN but hey there's a
first time for everything!

Hank has a great point, YouTube is all about quality content! They need to
invest in people that know how YouTube works not Hollywood. It takes a fresh
and open perspective to understand a YouTube audience. I'm 19 and I've been
making videos since the age of 15 and you learn so much about interaction and
branding but you never forget that you're just some guy talking to a
camera...WHICH IS PRETTY RELATABLE! I'm sorry I think I went on a random rant.

MY POINT: YouTube always should be supporting their original content creators,
not trying to help all these new companies become big and successful. There is
a reason I watch TV and a reason I watch YouTube. I don't need both on one
platform. Alright, done.

~~~
jacques_chester
> _YouTube is all about quality content_

As generalisations go, I feel this one falls between sweeping and wildly
optimistic.

99.9% of the stuff on youtube is utter bilge. I find a lot of useful
resources; but thanks to the magic of social media I get to see the titles of
a lot of LOOK AT THIS KITTEN and OMG CAR CRASH videos too.

~~~
mattryanharris
I feel ya but when I meant quality content I should've been more specific.
Hank and John Green have been making awesome quality content for YouTube
whether it be the Lizzie Bennet Diaries or Crash Course or the Brain Scoop.
This example also includes Philip Defranco who created SourceFed and many more
content creators working on their shows.

------
TimSchumann
Who is this guy?

I'm trying to find other stuff he's done but I can't find his Twitter,
Youtube, Facebook, anything...

Tumblr does frustrate me...

~~~
samarudge
<http://youtube.com/vlogbrothers>

<http://youtube.com/crashcourse>

<http://youtube.com/scishow>

<http://twitter.com/hankgreen>

<http://en.wikipedia.org/wiki/Hank_Green>

(In addition to that, he's also my employer, but that might not be relevant to
you)

~~~
TimSchumann
Thanks Sam. While not directly relevant, your employment is probably how you
can afford to answer the questions of social-media-know-nothings like myself
on the internet.

Tumblr frustrates me because I'm not 'in the stream' so to speak. The whole
thing seems to be designed to just whisk you away to more Tumblrs. That could
be great, but when you arrive at a page and have no clue who penned the words
you're looking at or where you can go to find more of their work... it borders
on infuriating.

Anyway, the reason I asked is I liked the post and found it tangentially
relevant to a project I'm working on with a friend. Gave me a new way of
thinking about a few things. So again, Thank You.

~~~
samarudge
Yeah Tumblr can be silly. I've been into Tumblr for a while, and prior to
about 6 months ago it was nearly impossible to find the original source of
something without trawling through pages of "notes".

Some people put links to twitter/other social networks on their blogs but
since probably >99% of the visitors to Hank's blog will get there from
somewhere else in his network (Twitter, Youtube or any one of our number of
community sites).

So yeah, don't feel to bad, Tumblr confuses even those of us who consider
ourselves "social-media competent"

------
lalos
_Online video isn’t about how good it looks, it’s about how good it is. People
who make online video are much better at making online video than people who
make TV shows_

When people go to youtube the bar is set quite low, they don't expect the same
as when they watch a show from a well established TV network that has a brand
to protect and pristine "quality" to portray. That would be a good reason of
whey this type of funding did not work out.

------
nrser
i can't imagine Google expected to recoup that capital. i would guess they
want YouTube to become TV - all of it. there is a lot of money in TV
advertising. it's a company-doubling oppertunity. and they might need TV-
quality production to get there. my last start-up was aquired by a major media
company. i would guess $5M was the smallest amount of money they could get
them to pay attention to.

------
meisterbrendan
This is an essential quote:

"Please, let the advertisers figure out for themselves how to tackle this very
new medium instead of trying to shape the medium to meet their needs."

Forgetting the rest of the article, I think this point is really salient to
the way lots of valuable web services are evolving right now.

------
treelovinhippie
Related note, I tried to sell Hank scishow.com sometime last year but was told
they had no cash before we'd even got to discussing figures. I would have
thought they'd be pulling in decent revenues across the network

~~~
notatoad
he refers to the funding as an "advance" that he doesn't expect to earn out
for three years - i'm guessing that means he's not pulling in any revenue from
youtube, as they've already paid him.

------
OGinparadise
_YouTube is a young company, it does not need to convert 100% of its value to
dollars. Please, let the advertisers figure out for themselves how to tackle
this very new medium instead of trying to shape the medium to meet their
needs._

Yeah but there's no Youtube, it was sold to Google, a 14-15 year old and
publicly traded company. As for advertisers and ads, Google is an ad agency so
they'll probably not going to take your advice.

~~~
cloudwalking
Actually, YouTube is fairly independent within Google. And Google is more of a
software company with an internal ad agency.

~~~
jacques_chester
It's pretty clear from their income statements going back to the invention of
AdWords and AdSense that Google is an advertising company that dabbles in
software on the side.

2010:

\- Advertising Revenue: $28.2B

\- Other Revenue: $1B

2011:

\- Advertising Revenue: $36.5B

\- Other Revenue: $1.3B

2012 (unaudited):

\- Advertising Revenue: $43.6B

\- Other Revenue: $2.3B

Travel allll the way back to 2001, the earliest figures Google has published.
Guess what the revenue split looks like? Yep: still an advertising company.

2001:

\- Advertising Revenue: $66.9M

\- Other Revenue: $19.4M

If anything has changed it's that Google has steadily become _more_ of an
advertising company.

Like Newscorp, the stuff you _think_ they do (search/services vs
news/commentary) is not actually what they get _paid_ to do. Both Google and
Newscorp make their money by using getting people to look at ads.

~~~
cromwellian
The vast majority of employees at Google work on stuff unrelated to AdWords
and AdSense, they work on technology, and get paid to do it and are not told
to come up with new ideas for showing more ads. A tiny minority of people rake
in money on ads, which frees up the vast majority of engineers to work on
other stuff. AdWords and AdSense scale, they simply don't need an army of
employees to maintain them, Google doesn't need 15,000 employees all working
on ad serving.

Like the vast vast vast majority of all consumer facing internet businesses
ever created since the dawn of the Web, Google was created to do something:
Search, without any clear business plan about how to make money. Most Web
businesses do not charge end user fees, they are founded to get users, and
either make money from ads, or get acquired by those that do.

Facebook: Ads. Twitter: Ads. Yahoo: Ads. New York Times? Ads. You really think
the journalists at the New York Times view themselves as working at an
advertising company because that's the only way they can get paid? You think
it's accurate to describe the New York Times as an Ad Agency?

Much rarer do we see people saying "Facebook is just an ad company" in forums,
this charge is always lobbed at Google, which says to me that there's some
intellectual dishonesty going on, people with an axe to grind.

Google spent nearly $7 billion on R&D in 2013. Most of this spending is
targeted not at ads, but in trying to develop other lines of business with
diversified revenue sources. Larry Page is not an idiot, he sees that relying
on ads for 97% of your revenue is a risky proposition. It just turns out to be
a hard problem to get people to pay for content now, even on mobile you can
see prices being driven down to free + freemium. Unless Google wants to be an
Enterprise company like Oracle (a market where people have a proven track
record of throwing money at stuff), it's at the mercy of what people are
willing to do, and as shown over and over again, people like get stuff for
free if paid for by others (ads).

Even for HBO and some other channels, the majority of media people consume,
even that on "for pay" cable TV is still funded by commercial ads. You take a
TV show which has a $2 million per episode budget, and you need a atleast 2
million people per week to pay $1. Now, how likely is that when many shows
can't even command an audience of 1 million free viewers.

~~~
OGinparadise
The number of employees on each department, even if you knew it, is totally
irrelevant.

NY Times is a newspaper and totally different from Google which has Adsense,
Doubleclick and Adwords. Google essentially controls online advertising and
95+% of their revenue is from....ads! Now with Google going 100% pay-to-play
on eCommerce and transactional keywords it's even more of an ad company
(milking the search goodwill.) You can call them whatever you want of course

~~~
Evbn
What percent of NYT revenue is from ads?

~~~
OGinparadise
"What percent of NYT revenue is from ads?"

Wrong question! What % of the world's advertising does NYT control, online,
offline or mobile? What advertising tools does NYT offer? What is the ratio of
ads vs content on money topics on NYT?

~~~
cromwellian
Before, it was "all that matters is how you are paid", now it's "let's finely
slice the details of this, so as to exonerate everyone else, but still try to
make Google a whipping boy." The axe needs more grinding.

~~~
OGinparadise
_Before, it was "all that matters is how you are paid"_

Said who? How about looking at what the company focuses on? Before seeing
content on Google I see a billion million gazillion ads, often looking similar
to organic results. A while back ads were on the page to pay the bills but now
they are the main content, by design. Shopping also is 100% ads. So what
company is Google again? Oh, yeah, trying to send the users to the best site
asap. My @ss.

~~~
cromwellian
Hyperbole is unbecoming. Google's mission is to organize the world's
information, to give you the best answer to questions, not to send you to "the
best site". Sometimes the best answer is a site, sometimes it isn't. Very few
users want a search engine that sends them to a linkfarm or another search
engine, they want answers in the fewest number of steps. If I ask what the
weather is, I want a temperature and immediate forecast, I don't want to have
to click through to Weather.com and initiate another 2 dozen HTTP requests for
extra resources to get the answer, especially for mobile. I'll click through
to another site if I want an extended 5 or 10 day forecast, or I want
something beyond factual data.

Since Knowledge Graph was introduced, there are now millions of queries that
don't even show any ads at all. For example, I search for "Hawaii" on Google
(just did it in an incognito window), and I get a Knowledge Graph card and
zero ads. I do it on Bing and I get travel ads for Alaskaair.

~~~
OGinparadise
_Since Knowledge Graph was introduced, there are now millions of queries that
don't even show any ads at all. For example, I search for "Hawaii" on Google
(just did it in an incognito window), and I get a Knowledge Graph card and
zero ads. I do it on Bing and I get travel ads for Alaskaair._

Your anecdotal evidence is worth nothing, we know the number of ad clicks
because Google reports them each quarter. And they are rising by double digits
quarter after quarter. So many more people are thinking that an ad is the best
answer. Surprise, huh?

~~~
cromwellian
The number of ad clicks can indeed rise even as the number of ads shown
declines due to better ad targeting. Your reasoning has been consistently
flawed in most of the threads.

~~~
OGinparadise
_The number of ad clicks can indeed rise even as the number of ads shown
declines due to better ad targeting._

So users are finding more and more of their answers in ads? Good thing Google
controls both ads and 'content.' And anecdotally the number of ads has
increased immensely on transactional keywords, especially after Page. Content
is buried by them. [http://www.zoekmachine-marketing-blog.com/wp-
content/uploads...](http://www.zoekmachine-marketing-blog.com/wp-
content/uploads/2011/12/Google-Adwords-HD-Monitor-637x650.jpg)

 _Your reasoning has been consistently flawed in most of the threads._

whatever you say. By the way, if you work at Google you should state so, quite
a few Googlers have that habit. I suspect you are, given the stock answer you
gave for the "best answer." If you work for Google, I don't blame you, It's
hard to defend the same practices you and your bosses railed against just 2-3
years ago.

