Both Greg Sterling’s article and the Wall Street Journal article about this same subject suggested that Google will allow preroll ads on YouTube merely for revenue reasons, I disagree. I don’t believe Google is just fighting for YouTube revenue.
I believe Google is fighting for an entire new ad revenue sector and for the survival of YouTube’s dominance.
Google allowed an entire internet advertising sector to open up by simply not thinking big enough. It is very rare that one can say that. Google will lose hundreds of millions of dollars in ad revenues, if not more, because of it.
If Google would have settled with Viacom initially, then Google could have authored a solution with Viacom (and any other content provider) to serve legal, ad supported content.
This did not happen. Since the beginning of that lawsuit virtually every media content provider (television stations, movie studios, etc.) have begun to offer their content online. The way the content providers are monetizing this are ads.
The future of online entertainment is legal, ad driven content. Google does not even have it’s foot in the door of this new advertising sector.
Think about the revenue Google would have already created had they simply created an API for video content distribution from providers like Viacom.
There is already a winner of sorts in this new arena, Hulu.
It is such a great solution, and in the year or so that I have been using them (I was a beta tester) I have seen many of the major content providers jump into this (including Viacom properties). Google dropped the ball in a very simple way.
There are content viewers, and there are content providers.
Google utterly ignored the content providers. You can’t do that. Imagine an ad system where there are no “advertisers”, only “viewers”.
You don’t have to imagine it, you can just visit YouTube.com
The fragmented and proprietary system of content providers that currently exists only exists because Google didn’t think big enough in the video content arena.
Hulu has created a solution for it, and an elegant one at that.
The real reason that Google will start to allow preroll ads on Youtube, is because they have to if they want quality content from media providers.
This is an incredible and embeddable web. Companies must package their content, whatever that content may be, in ways that still provide them revenue or value even if their content is embedded somewhere other than their own site.
Hulu is the only viable player right now that allows media providers to get value and revenue from their content, no matter where it happens to be on the web. PreRoll advertising is the reason you can watch Lost, The Office, and other TV shows online.
Google’s products are ads. If Google wants video revenue, they must provide a revenue model to the content providers.
They can’t do this without preroll ads on YouTube.
That’s the real reason it will happen.
They don’t just need money, they need to get their foot in the door.