YouTube Extends Lead Over Pack

Jul 3, 2006  •  Post A Comment

YouTube tightened its grip on the top spot among video-sharing Web sites in May, widening its lead on the competition, according to the most recent numbers from Nielsen Net//Ratings.

YouTube finished May with a robust audience of more than 20 million unique viewers. That’s up from 12.5 million in April, a 62 percent increase in online viewers. YouTube’s closest competitor thematically is Google Video, which held steady with a unique audience of about 7 million in both April and May.

The competition for eyeballs is what may spell success or failure for these red-hot online video ventures. The value of a large audience cannot be underestimated in the race to monetize the viral video and user-generated content in which these sites traffic.

YouTube’s growth trajectory can prime the pump for success as it looks to wring ad revenue from its young audience. However, YouTube, and other video-sharing sites that have captured the attention of young audiences, are still tasked with turning eyeballs into ad dollars.

“[YouTube] is three times bigger than Google Video and seven times bigger than Break,” said Will Richmond, president of broadband video research firm Broadband Directions. “Clearly they’re the ones to chase in the category. Now their big challenge is to make a business out of all their traffic,” Mr. Richmond said, adding that since AOL and MSN haven’t formally launched user-generated content yet–though both plan to–YouTube’s closest competitors are Google Video and Break.

YouTube is looking to monetize its growing popularity through partnerships like the one it struck in late June with NBC to promote NBC shows on YouTube. The pact represents the start of a new revenue stream for YouTube in more mainstream ad dollars. Until now, YouTube’s home page has been generally bereft of advertising, with some ads generated by Google appearing elsewhere in the site.

The company said it plans to introduce a new ad system later this year.

“We are currently building a new, innovative advertising model that will be released in the coming months,” YouTube Senior Director of Marketing Julie Supan said. “The Google and Yahoo ads are temporary but have allowed us to generate revenue in the short term.”

The company is pursuing a business model based on advertising, including promotions, sponsorships, ads related to content on the site, and banner ads, she said.

For now, YouTube stands out from the competition because it’s easy to use and it’s in the sweet spot for the “social computing trend,” a social structure that empowers individuals and communities rather than institutions, said Brian Haven, a senior analyst with Forrester.

But the challenge is that many brands are reluctant to associate with consumer-created content. However, deals such as the one YouTube struck with NBC will help bolster YouTube’s potential for additional brand name advertisers.

Exploding Atom

Another video-sharing site that has gained steam in the last few months is AtomFilms, which ticked up from a unique audience of 1.9 million in April to 3.2 million in May, a 60 percent rise. AtomFilms has grown its audience through a mix of user-generated content and original productions, CEO Mika Salmi said.

“We released our first four AtomFilms Studio productions in May and three became hits: ‘InSex,’ ‘New Boobs’ and ‘Game Over,'” Mr. Salmi said. “These drove a lot of traffic. It shows that people like short, high-quality original productions.”

Break and MSN also generated small monthly gains. Their growth, coupled with that of YouTube and AtomFilms, indicates that overall audience for video-sharing sites is growing and that there is additional market share to be had for each of the players.

Forty-five percent of youths who spent time online in 2005 downloaded or streamed video content last year, according to a 2005 Forrester Research report. In addition, 75 percent of adults and 92 percent of youths who surf the Internet use one or more forms of consumer-created content, such as blogs, message boards and wikis, which are compilations of information submitted by readers and edited for accuracy, the report said.