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YouTube Economics A study of how YouTube epitomises fundamental internet economics (Unknown 2010)
YouTube is the top provider of online video content and served over 14 billion videos in May, 2010. (Flosi 2010) (Unknown 2010) (Flosi 2010)
<ul><li>Why is YouTube so dominant in this market? </li></ul><ul><li>They were big first. (Kelly, 1997) </li></ul><ul><li>They use networking effects. (Rifkin, 2001b) </li></ul><ul><li>They hold our attention. (Goldhaber, 1997) </li></ul><ul><li>They are a provider of information. (Leibowitz, 2002) </li></ul><ul><li>These are the fundamental basics of economics on the internet. </li></ul>(Unknown 2010)
They were big first. (Kelly, 1997) The first YouTubevideo, shot by Yakov Lapitsky at the San Diego Zoo, was uploaded on Saturday April 23, 2005. This is the video: (Unknown 2010) In the period May 2005 to December 2005 the site grew from 30 daily users to over 3 million users (Jones PHD Thesis). (Lapitsky, 2005)
YouTube uses networking effects. (Rifkin, 2001) “ the clip culture that we see now is basically this demand that you can find any video at any time and you can share it with other people” (Karim, 2006) YouTube’s core business revolves around numerous embodiments of the networking effect. The site is designed to link videos to other videos, users to other users and content to other content. It is also designed to embed, share and distribute and can handle the load of spikes of activity on specific videos. (Unknown 2010) Most importantly, YouTube satisfies the need for “instant gratification” (Karim, 2006) in a network economy where users consume offerings and move to new ones at great speed. (Rifkin, 2001) ( Recommended for You , 2010) (hallbe, 2010)
They hold our attention. (Goldhaber, 1997) “ the average user spends about 30 minutes per day on YouTube… that’s more than a sitcom” (Karim, 2006) (Unknown 2010) YouTube’s product – user generated videos are a combination of informational and entertainment media. The site is designed with links to more content located everywhere, to encourage users to continue to view. There’s also the new Leanback functionality, that will continue to stream videos tailored to your account until you stop the feed (Yong, 2010). All the red highlighted sections to the right are links to more content. Keeping people on the site exposes them to more advertising material, increasing revenue. (julieg713, 2010)
YouTube is a provider of information. (Leibowitz, 2002) “ Concepts, ideas and images – not things – are the real items of value in the new economy.” (Rifkin, 2001a) YouTube certainly has and provides access to the concepts, ideas and images of its content creators. YouTube strives to provide users with not just entertainment (Yong, 2010), but news (Popkin, 2010), resources, guides (H., 2007) and social networking services. (Unknown 2010)
How does YouTube make money from providing entertainment and information? Analysts feel that YouTube does not make a net profit because of the significant cost of storage and bandwidth for the videos it provides. That said, YouTube’s income is derived through advertising revenue. Advertising revenue is closely linked with both network and attention economies. Network economies increase hype and exposure to advertising to wide ranges of demographics, attention economies can expose site visitors to large quantities of advertising material, the longer they stay, but also feeds back invaluable marketing data about user behaviours and click-through rates. In some cases, marketing data is as valuable as sales or even more so. YouTube is still a successful website, in the view of many. This is because profit is not necessarily the cornerstone of internet economics. The value of a company can be quite distinct from the profit the company makes. (Unknown 2010)
Reference List: Flosi, S. L. (2010). comScore Releases May 2010 U.S. Online Video Rankings . Retrieved June 25. 2010, from http://comscore.com/Press_Events/Press_Releases/2010/6/comScore_Releases_May_2010_U.S._Online_Video_Rankings Goldhaber, M. H. (1997). The Attention Economy and the Net. First Monday, 2 , 4-7. H., S. (2007). The Official YouTube Blog: Broadcasting Ourselves: Have a DIY Holiday... Retrieved July 6. 2010, from http://youtube-global.blogspot.com/2007/12/have-diy-holiday.html hallbe (2010). Links from Dramatic Kitty . Retrieved July 9. 2010, from http://www.youtube.com/watch?v=rizYD11FSKk&playnext_from=TL&videos=fUI9mDLiK8g&feature=rec-LGOUT-exp_fresh%2Bdiv-1r-2-HM julieg713 (Artist). (2010). Los Angeles Makeup Haul Part 1 Karim, J. (2006). YouTube: From Concept to Hyper-growth Kelly, K. (1997). New Rules for the New Economy: Twelve Dependable Principles for Thriving in a Turbulent World. : Wired. Retrieved June 10. 2010, from http://www.wired.com/wired/archive/5.09/newrules_pr.html Lapitsky, Y. (2005). Me at the zoo Leibowitz, S. J. (2002). Basic economics of the internet. In Re-Thinking the Network Economy: The True Forces that Drive the Digital Marketplace (pp. 9 - 24). New York: Amacom. Popkin, H. A. S. (2010). YouTube aims to be major news provider . Retrieved June 15. 2010, from http://www.msnbc.msn.com/id/37715719/ns/technology_and_science-tech_and_gadgets/ Recommended for You (2010). Retrieved July 9. 2010, from http://www.youtube.com/videos?r=1 Rifkin, J. (2001a). Entering the Age of Access. In The Age of Access: The New Culture of Hypercapitalism, Where all of Life is a Paid-For Experience (pp. 3-15, 267): Tarcher Penguin Putnam. . Rifkin, J. (2001b). When markets give way to networks. In The Age of Access: The New Culture of Hypercapitalism, Where all of Life is a Paid-For Experience (pp. 3-29, 267-269): Tarcher Penguin Putnam. . Unknown (Artist). (2010). YouTube Logo Yong, K. (2010). The Official YouTube Blog: Broadcasting Ourselves: YouTube Leanback offers effortless viewing . Retrieved July 7. 2010, from http://youtube-global.blogspot.com/2010/07/youtube-leanback-offers-effortless.html (Unknown 2010)