YouTube and the new creative class

Editors' note: This is a guest column. See Kevin Yen's bio below.

Five years ago, when online video was just getting started, individuals flocked to platforms like YouTube to share their stories with the world under the mantra "Broadcast Yourself."

A half decade after YouTube's birth, the site exceeds 2 billion views a day. It seems that everyone--from music labels to mainstream Hollywood studios to television networks--has joined the movement. Amid this vibrant, fertile, and expanding landscape, a creative class of budding, do-it-yourself media moguls--part distributor, part content creator, part producer, part entertainer-- is emerging.

The online-video ad market is growing up
A key catalyst for this new creative class is a maturing video monetization market. What was once mocked for offering mere online pennies, compared to analog dollars, has grown in effectiveness and sophistication to generate real revenue. The basic online display ad adjacent to a video has evolved to include in-stream ads, overlay ads, and even click-to-buy e-commerce links to sites like Amazon.com and iTunes.

In the last two years, for example, YouTube's home page went from offering one to now seven ad formats. Even online marketplaces have emerged to make it easy for anyone to buy and measure national cable television advertising across offline and online networks, all for as little as $20 per TV spot.

More ads, greater formats, and simpler sales methods enable a wider range of advertisers across the head, middle, and long tail of content. More advertisers bring more money to the savviest of online video content creators, and more money creates better content. The ecosystem is starting to feed itself.

Meet new media's emerging creative class
Fueled by the evolution and growth in advertising, new media's emerging creative class represents brands that few in the mainstream have heard of, yet it commands weekly audiences that often dwarf some of network television's biggest shows on a good night. Like the cable brands of the mid- and late 1970s (Showtime, HBO, etc.), their slow and steady success has transformed them into video juggernauts and positioned them to dominate the online (and potentially offline) video market in the years to come.

They have names like Machinima, Next New Networks, and Demand Media. Collectively, they represent billions and billions of online-video views. And many have transformed their fledgling businesses into successful and profitable online brands.

Take, for example, Shane Dawson, who commands more than 35 million monthly views across his latest YouTube videos. That exceeds the typical "American Idol" finale. Or YouTube user Phil DeFranco, whose channel on YouTube, as pointed out by a recent article in Fast Company, "has beaten 'Larry King Live' and 'The O'Reilly Factor' in daily audience." Views interest advertisers, and advertisers bring in money. As DeFranco points out in the same Fast Company article: "Some YouTubers in 2010 will make seven-figure incomes."

Independent musicians, likewise, are taking advantage of emerging revenue opportunities around online video to build a business by engaging their fans directly. Just one example is YouTube's Musician's Wanted campaign. The Partner Program extension enables independent musicians, bands, and labels to serve ads against and make money off of the original music videos they create, upload, and share on YouTube.

The secret of their success
New media's emerging creative class isn't lucky; it's just damn smart and hard-working. It's easy to dismiss a user like Lucas Cruikshank as a niche player whose obnoxious Fred Figglehorn character speaks only to tweens while making parents' ears bleed. The truth is, the 16-year-old and others like him are far savvier than the establishment thinks.

They are not only the actors and stars of their show, but they are the producers, the copy editors, and cinematographers; they work to market themselves, close advertising deals, and sometimes employ a team to support and promote them. They seek film projects, and engage brands and even traditional networks to potentially act as a distributor. After all, being able to directly reach an audience of 30 million 15-year-olds is clearly a channel many advertisers and established media would pay good money to connect with.

The emerging creative class is also young, so it gets the Internet. Its members understand that the Web affords them the unique opportunity to interact and engage with their fans. They do this by responding to comments, uploading and sharing response videos to fans, going to Twitter to share their latest videos, or connecting with and talking to fans on Facebook. They take advantage of deep analytical data provided to them by online platforms like YouTube to learn from and better understand what their audiences like and don't like; they study not only when they watch, but in what regions are they watching it.

One such partner, who was in the habit of uploading new videos on Wednesday mornings, noticed that most of his views took place on Thursday evenings. He started uploading new videos on Thursday evenings and immediately doubled his audience. Everyone has this data; it's just the new emerging creative class that understands how to find it and use it.

Enter the online rental
Online video producers--and more importantly, online-video consumers--are getting serious about transactions. A few years ago, the appetite wasn't there. But today, most platforms understand that not all content can, or should be, supported by the advertising model. The emerging creative class understands this and wants a scalable rental model that reflects its unique needs--in other words, a platform that has the flexibility to react, in real time, to market forces created by a dynamic and unpredictable online audience.

Given the proper tools, these content creators and distributors determine the cost and availability around their content. They will charge $5.99 the first week, $2.99 a month later, and then migrate to an ad-supported model to sustain demand and broaden their audience. This model is still in its earliest stages--after all, the vast majority of Netflix's revenue still comes from traditional mail route--but the times are changing, and so are consumer habits.

When it comes to the online-video revolution, we haven't even gotten past the first inch of the first yard. Only five years have passed, and there are many, many more years to come that will usher in more innovation, more users, and more smart and ambitious content creators.

The democratization of consumption and creation of online video have changed. Today, it is the young, nimble creator who understands that his audience must stay engaged; his competition is a mere click away, and if she doesn't use every tool at her disposal while controlling a 360-degree understanding of the business, someone smarter and faster will take the lead.

The money is already starting to come. The question really is, who is positioned to capitalize on it?