Tuesday, August 28, 2007

Monetizing YouTube - What About Micropayment Downloads?

Could micropayments be the key to monetizing YouTube? The New York Times has an interesting article
today about the history and future of micropayments. "In December 2000,
Clay Shirky, an adjunct professor in New York University’s
interactive telecommunications program, wrote a manifesto that people
still cite whenever someone suggests resurrecting the idea," writes the
Times. "Micropayments will never work, he wrote, mainly because 'users hate them.'"

But, says the paper, micropayments are here, just not in the form we
initially thought. Dot-com flameouts like BitPass, DigiCash, and
Peppercoin all tried various methods of micropayments with the hope
that content publishers would be able to charge a few cents to a few
dollars for articles, reports, images, and other downloads. For the
consumer, most of these schemes worked like a prepaid calling card --
load money into your account and buy stuff with credits.

wait. Amid the disdain, and without many people noticing, micropayments
have arrived -- just not in the way they were originally envisioned.
The 99 cents you pay for a song on iTunes is a micropayment. So are the
tiny amounts that some operators of small Web sites earn whenever
someone clicks on the ads on their pages. Some stock-photography
companies sell pictures for as little as $1 each."

Certainly, it is far too early to judge YouTube's just launched video overlay ads, but early user reviews are mixed, at best. Morgan Stanley's Mary Meeker estimates (after some revised math) that YouTube's ads will pull in between $75 and $189 million gross revenue per year -- which, with the astronomical cost of streaming video, won't really cut it.

So what about charging small amounts for high quality, downloadable
versions of commercial content on YouTube as a way to bring in money?
Sure, Google already tried that with Google Video, and shut that service down
citing an "effort to improve all Google services." But Apple has had a
lot of success selling TV shows and movies (they sold a million of them
in the first 20 days, and move tens of millions of video downloads per
year through iTunes), so the model is sustainable.

YouTube is already the web's most recognizable video brand, and Google could take pains not to repeat the mistakes they made
when launching the Google Video Store a year and half ago. This also
seems like a good opportunity to tie in another Google service,
Checkout, and put some heat on PayPal, which has become the web's most
successful micropayment processor (though it is also used for

YouTube could further offer a way for user generated content
creators to monetize content other than ads. While it's unlikely that
people would pay for single episodes of Lonelygirl15, die-hard fans of
the web show might pay a nominal fee for high quality, DVD-burnable
downloads of the entire series. Similarly, NBC has had great success
with their YouTube channel showing clips of Saturday Night Live
(including owning the 5th most watched all time), and they could use that popularity to sell DVDs like "The Best of Chris Farley" in a YouTube download store.

The biggest hurdle to a download store would be DRM. Apple has had
some success convincing music labels to sell songs sans-DRM, but their
video downloads are annoyingly locked into iTunes (I'm still sore I
can't burn my 2006 Fiesta Bowl download to DVD). Any download service
that can figure out how to convince the studios to do away with DRM --
or at least make it a whole lot less intrusive -- will be an instant
hit with users.

Article Link

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