In October, 200 billion videos were watched online worldwide. The number is immensely impressive until the question is asked whether the online video business makes any money.
Research firm comScore released its figures for video activity:
In October 2011, 201.4 billion videos were viewed online from a home or work location, with the global viewing audience reaching 1.2 billion unique viewers age 15 and older.
Google’s (NASDAQ: GOOG) YouTube dominated the numbers, as it has in the U.S. for years. With 88 billion videos viewed in October, it had 43% of the market. China-based Youku (NYSE: YOKU) was in second place with 2.3% share. It was followed by U.S. premium content site VEVO, Facebook and Japan’s Dwango. Each of these three had a market share well below 2%. The data also suggest that Facebook, with its 700 million members, has been unable to transform itself into a home for premium content.
In the U.S. market, the top video sites, which include the portals Facebook, YouTube and Hulu, have attempted to make a profit on subscriptions and advertising. There is little evidence that this has worked, although video ads do carry a premium to most others. Certainly none of the companies in the industry has bragged about large profits.
YouTube continues to struggle as it searches for a model that might turn its huge reach into substantial earnings. It recently redesigned its site to feature highly premium video and downplay amateur content. That may help draw high-end TV and movie companies to use YouTube as a distribution platform. But so far the great majority of content at YouTube is short clips made with rudimentary video technology. It is not the sort of video that most advertisers want to support.
It can be argued that online video content is in its infancy. That is not really true. YouTube soon will be nearly a decade old. If the industry leader cannot brag about large margins, it is hard to imagine which company can.
Douglas A. McIntyre
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