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How YouTube is turning things around

Don Reisinger thinks YouTube is turning things around and becoming more valuable. Is that really happening?

I've been extremely tough on YouTube lately. About one month ago, I called for its head if Google doesn't turn things around quickly and I've also said that it's the garbage bin of the Internet. And while I still believe the second point, I'm starting to think Google is doing just what I said it should -- start working with major players and turn things around.

After it announced that YouTube would be working with Seth Macfarlane and feature his own channel, two big announcements from the YouTube camp have me changing my tune and thinking that Google may be on to something big here.

First, YouTube is coming to TiVo Series3 and HD boxes. At first glance, this deal may seem like a big deal, but in reality it's nothing more than a way for YouTube to expand its horizons and hopefully make it such a valuable attribute of set-top boxes (it's already on the Apple TV) that companies will be willing to enter sweetheart deals to have it included in their own boxes. In other words, it could have some long-term effects, but right now, it's not going to have any impact on the service's losses.

But in a far more important announcement that will have an impact on the entire service and probably have lasting effects, Google also announced that it has struck a deal with Lionsgate that will see the independent film studio enjoy a revenue-share agreement with YouTube and get a branded video channel to broadcast movie clips.

Now, the chances of this deal having a major impact on YouTube's bottom line right now are probably slim, but we can't downplay the significance of it in the long-term.

Much like the Seth Macfarlane deal, the Lionsgate deal highlights Google's intention to strike deals with major players in the entertainment industry to restore order to an outlaw site and find ways to bring advertisers to YouTube.

The main problem facing YouTube isn't that it can't get people to the site -- that's the least of its worries. Instead, Google is all too aware of the fact that monetizing YouTube and making it a viable business is not easy at all.

First off, the company is dealing with the problem of downright ridiculous videos being uploaded every day. Whether it's watching someone eat their lunch or perform a card trick, YouTube is full of crap that advertisers don't care about and simply don't want their ads running on. Let's face it, will a Dove soap commercial really work on a video called, "Fred Goes Swimming"? I think not.

Compounding that problem, there's no demographic data to speak of and most advertisers simply aren't willing to spend money on any video (regardless of relevance) if they don't know who is watching it.

To make matters worse, YouTube is inundated with copyright infringement that not only makes it a prime target for lawsuits, but makes it a thorn in the sides of major film and TV studios.

Taking all that into consideration, I still believe YouTube is becoming a valuable property. Sure, it has its problems and the company really needs to fix the copyright issue, but by striking deals with major film studios and other influential entertainers, Google is putting YouTube on a track for profit.

That said, it needs to do more.

The way I see it, Google needs to separate the crap from the quality. Instead of combining everything, Google needs to make a concerted effort to segregate the professional material from those videos that are created by the average person for the general public's consumption.

On the public's side of things, Google should simply try to sell banner ads at a high CPM and make money on the traffic. Instead of trying to find companies that would sell ads on the video, it can try to monetize it as much as possible regardless of the video's content.

Google should place all of its arrangements with professional video providers in a totally different part of the site (something much better than Channels) and do everything it can to determine demographics and sell advertising on the videos. Upon doing so, it should be able to see major revenue increases as more companies jump on the bandwagon.

And why would more companies jump on the bandwagon? Simple really: Google will use these deals to its advantage, sell advertising, and drive viewers to them by funneling its huge user-base to it. Upon doing so, it brings them to a controlled environment where advertisers have peace of mind and Google has demographic data. And once it can prove that the vendors are making money through the arrangement, more studios will come aboard and slowly but surely, YouTube's losses will turn around.

And in the end, everybody wins. The users who like to upload garbage can do it all they want and not worry about any involvement from Google. Google can get away from its issues with user content and find a way to monetize YouTube through professional videos. And major film and TV studios who have been wanting to capitalize on YouTube's traffic can finally do so after seeing how Lionsgate and Seth Macfarlane turn quite a profit with little content.

YouTube is finally turning itself around. And although this is just the first step of many and the profit potential isn't too high right now, it's making solid moves that should reap huge rewards in the future.

Want to know what Don is up to? Follow him on Twitter and FriendFeed.