A recent WSJ article mentions that when YouTube tested “pre-roll” ads (i.e., ads that play before the video launches), more than 70% of viewers abandoned the site.
Consider two startups entering the business of sharing videos:
Startup A has a lot of financing, and has not chosen a “revenue model” yet – first it plans on building dominance in the market. Then it will figure out how to monetize the traffic.
Startup B cannot afford to pass on revenue for very long, so it offers an ad-supported service. However, as in the above statistic, pre-roll ads deflect 70% of visitors – and many may switch to Startup A.
If Startup A had a plan for making money, it would have caused them to shrink and fail like Startup B. However, a day will come when Startup A must also make money – and then it will discover that its market share is only the result of its ad-free environment – as soon as it advertises it will lose viewers, too.
The difference between YouTube and most other “Startup A’s” -is that YouTube has a thousand brilliant minds at Google who spent ten months trying to find a solution. Most startups are not that fortunate.
Posted in Blogging, Business, Business Strategy, Case Studies, Consumer behavior, GOOG, Google, Internet, Management consulting, Marketing, New Ventures, Statistics, Strategy, youtube
As a professional blogger (and professional consultant) I like statistics. For my blog, I want stats on who reads what, so that I can better understand my audience and the articles that are most interesting.
One way to do this is by “forcing a click” – not showing the entire article on either the home page or RSS feed, thereby requiring an interested reader to click the “More…” link.
However, blog readers frequently find “More” links very annoying. A recent example is the Freakonomics blog, which changed from “full feeds” to “partial feeds” when it moved onto the New York Times website. Angry comments are coming in hourly. Another popular blog “Techdirt” believes that full feeds not only make readers happy, but lead to increased readership.
Perhaps this is a variation of the Schrodinger’s cat phenomenon: tracking readers affects readership.