There’s an old joke about a company that’s losing money on every sale declaring, “we’ll make it up in volume.”
That’s probably not Google’s (NASDAQ: GOOG) strategy, but the search giant just announced a revenue-sharing plan that may greatly expand the number of videos on the video site, which has yet to turn a profit for the company.
Today Google’s YouTube announced a partnership program that lets individuals posting popular videos register to get a share of ad revenue. YouTube said it will look at a number of factors — like the number of views the video attracts, how much it’s shared, and its compliance with the YouTube Terms of Service — to determine if it’s eligible for a cut of the revenue.
“If your video is eligible for monetization, you will receive an e-mail and see an ‘Enable Revenue Sharing’ message next to your video on the watch page, as well as in other places in your account,” the video-sharing site said at its YouTube Biz Blog.
YouTube said it would sell advertising against the popular videos and pay the owner a share into his or her Google AdSense account each month. The program is being rolled out in the U.S., though YouTube said it hopes to roll it out internationally “soon.”
Analysts said the main issue with YouTube turning a profit has been less about volume than quality.
“Advertisers need first right of refusal because they probably don’t want their ad sponsoring the dude with a big mole running around in his underwear,” Creative Strategies analyst Ben Bajarin told InternetNews.com.
Bajarin said he thinks the program has potential to attract better quality videos that might appeal to advertisers. “If a mom uploads a great video of her baby doing something silly, why shouldn’t a company like Gerber want to be part of that?” he said.
More quality, or more junk?
But Benjamin Wayne, CEO of Fliqz, is skeptical that the program is a good deal for video producers or will be of much help to YouTube. Fliqz provides plug-and-play video solutions to businesses on the Web.
“It’s hard to plan what will become viral — no one’s figured out how to do that,” Wayne told InternetNews.com. “If you’re uploading videos to YouTube anyway and you happen to be extraordinarily lucky enough to ‘win’ with this program, which sounds more like a lottery to me, then great. Otherwise, I don’t think it’s going to prove to be worth anyone’s time and effort.”
“YouTube hasn’t suffered from a lack of UGC [User-Generated Content]. Now it sounds like more junk is coming.”
Google bought YouTube three years ago in a blockbuster $1.65 billion stock deal.
It’s since continued spending as it seeks to turn a profit with the unit. Earlier this month, Google acquired On2 Technologies for $106.5 million in stock. On2 Technologies specializes in video compression technology that could improve the user experience and quality of videos on YouTube.