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Ad buyers beware: Google’s deal for YouTube comes with risk
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Can home movies, personal photos and pithy commentaries known as user-generated content at Internet social sites successfully co-exist with advertising?
That is the $1.65 billion question looming over Google Inc. after its acquisition last week of YouTube.com, the 18-month-old home video upstart.
In announcing the deal, Sergey Brin, Google’s co-founder, said he expects YouTube “will be a great channel for advertising.” And that has some experts questioning whether such an abrupt change will repel the very people whose movies have made it such a popular Web site, drawing 100 million people
a month.
“The whole bloody thing could fall apart” if Google isn’t careful, said Gian Fulgoni, the Chicago-based chairman for ComScore Networks. “I don’t think there’s any question that there is risk in the strategy.”
How advertising is mixed in with YouTube’s thousands of movie clips comes as other social sites across the Web are experimenting with ways to bring in profits along with mouse clicks.
YouTube, built on sharing home videos, ranging from funny to incredibly amateurish, did not pay for content. In contrast, Revver.com, a YouTube rival launched a year ago, does pay for its movies.
“YouTube gets all the value” from the content users put up, said Steven Starr, Revver’s chief executive and founder.
“We want to create a sustainable model for the user-generated crowd,” Starr said. “It’s our goal to support the creator.”
Revver was built with advertising in mind, he explained. At the end of each video, a short, clickable ad appears. Any revenue an ad generates is split 50-50 between Revver and the video’s maker.
One creator, for instance, has generated $35,000 so far and others are pulling in hundreds of dollars a week.
“It’s the idea of recognition vs. reward,” Starr says. At YouTube, if you have a popular video, you get plenty of recognition from the viewers and pats on the virtual back for a job well done. With Revver, “we believe it is incumbent on anybody who wants to be a creator of content to get paid.”
As a result, the videos on Revver are generally of a higher quality than those found at YouTube, Starr claimed. There are roughly 100,000 on Revver.
“Top-notch video creators are coming to us for an opportunity to sustain their creativity,” Starr said. “That’s what we’re striving to do.”
Changing the tone at a social Internet site can alienate users.
Just ask Jill Roberts, a 23-year-old showroom manager at the Merchandise Mart. She was an avid user of Facebook.com, a social site originally geared for college students that could be the next site to sell for $1 billion, with Yahoo Inc. reportedly the interested buyer.
But since Facebook has been opened up to high school students, and now anyone with a valid e-mail address, Roberts is finding the clubby atmosphere less inviting.
“It’s not as private anymore,” she said. “I look a lot closer at who wants to be my friend now.”
That may be because over at MySpace, a social networking site that was purchased last year for $650 million by Fox Interactive, a News Corp. division, some of the friends aren’t really friends. Some aren’t more than advertisements.
Comic actor Will Ferrell, for instance, wanted to be friends with millions of MySpace users to promote his movie, “Talladega Nights: The Ballad of Ricky Bobby.”
While having Ferrell as a friend could be fun for some people, the trend concerns Matt MacQueen, director of experience planning at Chicago ad agency Arc Worldwide, who thinks marketers have yet to figure out how to pitch users of
social sites.
“Social networking sites are not the place for marketers to be intrusive,” he said. “These communities are there for people to network for the common good, not to be marketing bait. They are not loyal to the social networking site, they are loyal to their friends.”
Despite the changes, MySpace appears to be doing better
than ever.
A recent survey from ComScore found that people between 25 to 54 years old made up 57 percent of the users at MySpace, an increase of 14 percent in one year, Fulgoni said.
“News Corp. has owned MySpace for about a year,” Fulgoni said, “and its user base has grown by 35 million in that time.
“They expanded the size of the franchise, increased the buying power of the audience and really did not alienate users. And from an advertiser perspective, the real buying power is with these older people, not the 18-24 year olds.
“Buying it for $650 million could be the deal of the century for Fox,” Fulgoni said.
Still, some sites that are strongly influenced by the opinions of teens and young adults are vulnerable to the ever-changing whims of those users.
“They love you, they hate you,” retail consultant Howard Davidowitz, chairman of Davidowitz & Assoc. Inc. in New York, said of young consumers. “Tremendous fortunes have risen and fallen based on that fickleness.”
While not naming any specific Web sites, he cited Merry-Go-Round as a classic example of being hot, then dead. The teen retailer once had “thousands of stores around the country. Then one day they weren’t cool anymore,” Davidowitz said. “Now they don’t exist.”
To make things more challenging, marketing to users of social networking sites is completely new.
“The old mass marketing model, which is pushing the message out to a passive group of sheep,” doesn’t work for these sites, MacQueen said. Rather, the marketing, like the interaction among users of the site, needs to be “more one-on-one,”
he said.
“It’s user-centered marketing. You have to look at a customer need or problem, and then have the brand give the customer what he wants."
ERIC BENDEROFF
Chicago Tribune
