Google, Relevance and YouTube Video

by Steve Rosenbaum 

Ever wonder how big web video has become? Well Comscore's July numbers show that 186.9 million Americans watched online content videos in the month of June 2014. Google ranked #1 with 153,328 billion viewers.

A very long time ago, in what now appears a distant memory -- there was a promise of a world where information would be available; easily accessed. shared and organized. Google did a remarkable thing, building a search engine that could find what you were looking for magically and deliver it to you seamlessly. It was -- and is -- a wonder of the modern world.

And while in its early days Google wasn't an AdTech company, they found out quickly that organizing the world's information created a tremendous opportunity for advertising. Google AdWords was born in October 2000.

The original idea came from Bill Gross at Idealab -- and was named GoTo.com, later renamed Overture. In October of 2000, Google launched AdWords - with a simple sentence on their home page: "Have a credit card and 5 minutes? Get your ad on Google today."

But unlike Overture, Google made two brilliant innovations. Overture's auction model let advertisers to buy their way to the top of the listings -- a simple auction where highest bid got the most exposure.

But in a pay-per-click world, Google realized that approach would fail, since irrelevant ads would pollute the pages. And bad ads meant no clicks.

Google invented a "clickthrough rate" to measure an ad's relevance. Google incorporated user behavior into the equation and so an ad with a lower bid, but more relevance, would rank higher. The result was new "economy of relevance," as John Battell famously explained it.

That "economy" turned Google into a massive business, and changed the way advertisers used the web. Today AdWords is Google's main revenue source, generating $42.5 billion in 2012.

So all is good in the world of Google.

But along the way, the web changed. People formerly know as "The Viewers" or "The Audience" emerged as both consumers of content and CREATORS of content. Today we blog, tweet, check in, share, re-tweet, and link. And all of that sharing looks to an algorithm like a never ending expansion in content And at the same time brands, media companies, business publications, magazine publishers book publishers, data aggregators and research firms have all jumped in to the content creation arena. And, most puzzling for both advertisers and Google, they're all making video.

Google is smack in the middle of this puzzle, and has been testing all kinds of ways to turn noisy video content into relevant, ad-worthy inventory.

So far - there have been a few of false starts and few big wins.

Then, YouTube was handed over to Susan Wojcicki. Wojcicki was employee #16 at Google, and the company literally was started in her parents garage. Wojcicki developed AdSense, which many would say funded the growth of the Web by allowing websites large and small to get paid by showing Google ads on their pages.

Little know fact, Wojcicki has been deep in video for a long time. As early as 2006 she was running Google Video -- set up to compete with YouTube. Instead, she argued in front of the Google Board to buy YouTube for $1.65 billion, and then Google Video was shut down.

Google's challenge in video advertising has two major threads.

Users of AdWords represented a new community of advertisers. The low cost, ease of use, and simple measurable results created a massive new user base of relatively small dollar advertisers. Anyone with a credit card and a keyboard could be up and running with contextually relevant ads that generated clicks and sales. It was a magical elixir.

But video ads haven't behaved the same way. Google has shared a variety of tools to make the creation of video ads user-friendly, but they haven't seemed to connect with the same early adopter advertisers that launched AdWords into the stratosphere.

So advertisers who might have supported "long tail" content have been slow to shift to Google's self-serve model. And as YouTube's traffic has grown, along with Google's continued interest in the increasingly important web video ad market, it makes sense to meet the market need with YouTube "select," an offering of quality "brand-safe" channels.

Which isn't to say that YouTube isn't a darn big business, it is. A serious $5.6 billion business in 2013, up 65 percent over 2012.

This can be at least in part attributed to the growth of YouTube on mobile, with small screens making up 40 percent of its traffic now, compared to 25 percent last year. Google said on an earnings call in 2013. it's a remarkable jump as just 6 percent of YouTube traffic was mobile in 2011.

But so far, the innovation and revenue has happened on the YouTube's most popular and highly viewed channels. Yes Pewdiepie is generating significant revenue, but he's also driving a stunning 5.4 billion views. Monetization has been growing for channels on YouTube that deliver audiences that look and feel like cable TV. Large audiences, and broad topics. But the revolution that began with AdSense, fueling remarkable growth for web sites and blogs, has so far eluded web video. This isn't a criticism of YouTube, far from it, they've created the platform for video discovery. But moving video revenue to niche video content may be less susceptible to a centralized sales approach.

The puzzle is this: If YouTube's niche audience lives in their embedded network, with contextually relevant video appearing on pages that provide context, community and appropriate related content, then that's where the revenue and sales are likely to come from. What percentage of YouTube's 153,328 million viewers are watching video on sites other thanYouTube.com? That data isn't public, but sources say it may be as much as 60 percent of total views. Turning that audience into revenue would be a huge business for Google, and a powerful new force in revenue for content creators and curators working in the niche network economy.

No one knows this better than Susan Wojcicki, who's been pretty vocal about how important the channelization of web video is going to be. "There will be some device that brings a lot more Internet to the TV, to the living room. At that point, I'm pretty confident that TV will look a lot more like online video", Wojcicki told Forbes' Robert Hof. "People will have all these different channels, they'll be able to choose what they want to watch, everything will be on-demand. I think all the different existing players will adapt to that environment."

So stay tuned... as web video evolves, revenue for programming is already on the move. Finding the path forward for channelized niche content on embedded sits can't be far behind.

SOURCE: huffingtonpost.com