Peter Kafka

Recent Posts by Peter Kafka

YouTube Is Happy to Take Your Money, but What It Really Wants Are Ad Dollars

ryan higaLove YouTube, but hate the ads?

Then you’re not going to be any happier with most of the subscription videos the site is going to start selling. They’re going to have ads, too, say people familiar with YouTube’s long-awaited plans.

That should give you a sense of how incremental YouTube’s move will be when the site formally announces it this week, likely on Thursday: This isn’t a shift in strategies, or an attempt to take on Netflix or Hulu, but a relatively simple add-on option that gives YouTube video makers another way to make money.

YouTube’s core business is going to be the same: Selling its billion-person audience to advertisers.

Subscriptions may still be welcome news for some video makers, who have been complaining about the ad dollars they are generating from the site. And an ad-free option that YouTube has also pitched may appeal to children’s-TV producers, as well.

But lots of video makers will likely hold back and wait to see the results of the experiment YouTube is starting up. The key question for a producer: If I’m already struggling with the economics of the free stuff I’m providing, where am I going to find the resources to make “premium” stuff, too?

A la carte subscriptions seem particularly useful for established YouTube stars with low production costs and rabid fans, like Freddy W, Ryan Higa or the Smosh guys.

Certainly, almost all of their teen video viewers are unable or unwiling to pay to watch their stuff. But they may be able to convert a small percentage of their superfans to open their wallets (or their parents’). Just like the Rolling Stones will convince some poor soul to pay $169.98 for a boxed CD set next fall.

Eventually, if this stuff works, YouTube may be able to start bundling cable-like packages of content together — say, a comedy block, or a sports block — and then things could get more interesting. And if all of that works, and YouTube proves there’s a real business for pay video on the site, perhaps it will start becoming attractive to the TV and movie guys YouTube has been trying to court without success for a very long time.

And then things could get very interesting.

But for now, don’t expect much. And do expect a lot of ads.

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