I was surfing around the Web today and didn't have to go far to find aby Matt Asay over on CNET's "Open Road" discussing YouTube and Hulu.
In a piece entitled, "Quality pays: Hulu trumping YouTube," Asay makes the point that because of Hulu's $12 million profit, Google needs to do more with YouTube. Asay believes that Google "needs to show equal care for the [entertainment] industry's IP" and "improve quality."
Generalizations aside, I need to disagree with my colleague on what YouTube should do. Asay claims that YouTube shouldn't become Hulu, but I think that's plain wrong. Hulu is a success today not because it has high-quality programming or respects intellectual property. Hulu is a success today because all the content contained on the site is controlled and demographic data is readily available.
Rest assured that no matter how much money Google is losing on YouTube, it's well worth the cost. No matter what we may think about YouTube and its obvious issues, we can't lose sight of the fact that without all that copyrighted material, YouTube wouldn't be half as popular as it is today and whether Google wants to admit it or not, it needs those clips on there.
It's no longer a question of whether user-generated video is important -- it is -- or if it should be kept on YouTube. User-generated video is how YouTube can bring people to the site and allow it to funnel those people to professional content that Google can monetize. User-generated video isn't the key to making money, it's the professional video that matters most to advertisers.
Advertisers don't want to spend money on YouTube because they don't know what they're getting. In other words, if you're an advertiser trying to reach a specific audience, do you really want your brand to be anywhere on YouTube? Do you want it to be pre-rolled before a video showing an 80-year old man mooning a crowd of onlookers? Do you really want it to run as a post-roll after a questionable statement was made by an individual halfway around the world?
Even worse, do you really want your ads placed on a site where demographic data is largely unknown? Let's face it -- YouTube is huge and just about everyone goes there. Unless you can pick a specific show or series on the site, it's practically impossible to ensure you're targeting the right audience.
But Hulu is different. Unlike YouTube, the content is controlled and you know what you're getting before you start advertising on the site. Even better, demographic data is readily available thanks to the networks and you already have success rates based on television ad placement. In other words, it makes far more sense to advertise on Hulu from an advertiser's standpoint than on YouTube.
So what should Google do with YouTube? Continue adding professional content and market it as effectively as possible. It can't forget that user-generated video is still its "attention-getter" but professional content is what will make it money. And unfortunately, an important part of that is hosting intellectual property that shouldn't be on the site.
I think Google has found itself in a pretty bad mess. The company realizes that through sheer numbers alone, YouTube is extremely valuable. But for all its value, it's a victim of its own content and the only way to be successful is to keep that content so people will flood to the pages. And once that happens, the company needs to try as hard as possible to filter some of those people through to the professional videos that will help it turn a profit.