YouTube, the Internet darling, is getting ready to cash in big time. Once bullied by the Big Media boys, it’s now being wined and dined by investors - and advertisers - with some very deep pockets.
Nearly 20 million people visited YouTube last month, downloading 2.5 billion videos - the kind of stuff you won't find anywhere else.
"People have access to digital devices from cameras to cellphones that have video capabilities,” said YouTube CEO Chad Hurley. “So we're going to see a phenomenal amount of content coming into the Internet."
Hurley, 29, was the toast of the recent Allen and Co. investment conference in Sun Valley, Idaho, where executives from traditional media firms were eager to take a meeting with the latest wunderkind of new media.
"If you're going try and lure in tomorrow's viewers you really need to be where they are today,” said Cynthia Brumfield, an industry analyst at Emerging Media Dynamics. “And young people today are on YouTube, they're on Myspace they're on other sites that are beyond the reach of traditional television marketing efforts."
Earlier this year, NBC sued YouTube for carrying a copyrighted clip from Saturday Night Live. The network has since turned around and struck a deal to provide content for the Web site. Analysts expect to see similar partnerships with other media giants. (MSNBC.com is a joint venture of Microsoft and NBC Universal News.)
"A partnership with a large media institution will mean that advertisers will be more comfortable to place their ads on the site,” said Brian Haven, an analyst at Forrester Research. “And then later on, as they learn more about the consumer-generated content, they'll find a way to integrate ads into that as well."
And advertising is how YouTube is ultimately going to make money, say industry watchers, since selling subscriptions or charging people to watch content would probably drive its audience away. The question is, will big advertisers be willing to be seen on you tube?
"Advertisers are scared to associate their brands with consumer-generated content,” said Haven “And that's a big problem for sites like Youtube and even sites like Myspace."
So thechallenge for YouTube is to make the site clean and friendly enough for mainstream advertisers, without losing its edgy feel and turning off its young audience.