YouTube makes premium video play, opening up mobile advertising opportunities
By Chantal Tode
May 13, 2013
As YouTube expands its focus to include premium video, mobile is likely to play a key role in how the content is consumed and in attracting big brand advertisers.
Digital content is increasingly being consumed via smartphones and tablets. With its new paid channels offering, YouTube is looking to be a bigger player in premium video while also giving content creators more choice in how they monetize content through a combination of subscriptions and ads.
“As long as YouTube has been around, it's been a video-snacking juggernaut for consumers,” said Eugene Youn, vice president of business development at Rhythm NewMedia, Mountain View, CA. “With its investments in premium channels, YouTube is now becoming a lean back media powerhouse as well, which makes it super relevant to big brand advertising.
“Mobile should play a huge role in YouTube's strategy,” he said. “Especially now that YouTube has a standalone app on iOS, they have a great chance to be a major player in premium mobile video.
“They must build their strategy around this. We've already heard from our own publishers that mobile video usage is quickly surpassing online on their sites, and we know this to be true for YouTube as well.”
YouTube last week launched a pilot program offering subscription-based channels enabling mobile, desktop and TV users to watch content from a variety of providers with fees starting at $0.99 per month and each offering a 14-day free trial. There are 53 channels at launch, including Ultimate Fighting Championship, which is offering classic fights.
The strategy addresses how content is being consumed across multiple screens.
For example, once someone has paid for a subscription to a particular YouTube channel, they will be able to watch that channel anywhere regardless of whether they are viewing from a desktop computer, tablet, smartphone or connected TV.
“Since users nearly always have their mobile devices on them, the role of mobile in this strategy will be significant,” said Nikao Yang, senior vice president of new business development and marketing at AdColony, Los Angeles.
“The challenge for YouTube working with paid channels in mobile, or rather the challenge for their content creators, is finding the sweet spot for offering paywalled – subscription - content and ad supported content,” he said.
YouTube could eventually incorporate a combination of advertising and paid subscriptions that work hand-in-hand, similar to value-exchange advertising, per Mr. Yang.
This model is commonly seen in many mobile apps in the marketplace today, with some publishers integrating value-exchange video ad placements to allow users to view videos ads so they can earn credits that can be used to unlock paywalled content or purchased items.
“Allowing consumers a choice in how they'd like to access their content, especially in a mobile environment, could be key to success here,” Mr. Yang said.
Mobile has a played a key part in YouTube’s growth as users increasingly consume a variety of types of content from their smartphones and tablets.
Like many other content distribution services, YouTube is finding that its mobile user base is growing very quickly. YouTube recently reached one billion active users, with mobile accounting for 25 percent of its user base.
The company has done a good job addressing mobile users, with its videos optimized for all mobile devices.
However, like many other companies trying to scale up in mobile as desktop users migrate to smartphones and tablets, one of YouTube’s challenges has been monetizing mobile.
Premium ad inventory
With the demand for premium in-stream video ad inventory on mobile far greater than the supply, marketers are likely to view YouTube’s paid channels positively.
“Mobile audience reach has become table stakes for media companies,” said Walter Harp, vice president of product management and marketing at Mixpo, Seattle. “Agencies and advertisers are going to demand it more and more.
“Media companies have spent the last two years responding to that,” he said.
“Really their only challenge will be growing net new video ad impressions thanks to paid content viewed on YouTube mobile properties.”
YouTube could face some other challenges with this strategy as well.
For example, it may be difficult to attract big brands with a combination of user-generated and premium video.
Additionally, driving discoverability for premium content may be an issue.
The paid channels pilot is an expansion of YouTube’s partner program which launched in 2007 as a way to enable content creators to earn revenue. Today, there are more than one million channels generating revenue on YouTube across categories such as news, education and entertainment.
At launch, users will only be able to subscribe from a PC but will be able to watch content on a computer, phone, tablet and TV. The ability to subscribe from more devices will be added soon.
Additional channels will be added going forward, including Sesame Street, which will be offering full episodes when its channel launches.
“YouTube should separate the worlds of user-generated and premium content,” Rhythm NewMedia’s Mr. Youn said. “Mixing these two things under the same umbrella is less than ideal for big advertisers.
“To attract TV-class brand advertising dollars, premium needs to take center stage,” he said.
“How they will promote these premium channels to make it easier for users to find high quality content over the masses of video already available will be key.”
Chantal Tode is associate editor on Mobile Marketer, New York
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