IDC Questions YouTube’s Business Prospects

Even though YouTube has about 40 percent of the burgeoning video-sharing market, with more than 13 million people visiting the site every month to watch an eclectic mix of video content, IDC research analyst Josh Martin issued a report today doubting that the service will ever be able to squeeze sufficient revenue from an audience that has gotten used to sampling the goods at no charge.

YouTube executives have indicated the company will sell advertising, which will be introduced gradually to the site during the next few months. The IDC analyst doesn’t think advertising is a sure thing, though, noting that YouTube’s core audience might be alienated by the commercialization of the site.

What’s more, Martin wonders whether advertisers will want to be associated with some of the content on YouTube, which includes amateurish, violent, and sometimes sexually graphic clips. To complicate matters further, there’s the issue of copyrighted material, which is regularly uploaded to the site by its online denizens.

Make no mistake, the challenges and issues raised by Martin are real. YouTube must find a way of matching advertising with appropriate content and of ensuring that its copyright-related legal exposure is mitigated, if not eliminated completely. Still, I am not of the opinion that YouTube will drive away its visitors by introducing advertising. Most people will be willing to view a short advertisement before watching a video clip, especially if the alternative is a subscription-based service that would involve monthly credit-card charges. Advertising will not be perceived as a unacceptable imposition.

YouTube might suffer a modest erosion in monthly traffic, and some content contributors might not attract advertising because their fare finds favor with a negligible demographic. On the whole, though, YouTube would survive, and I believe it can make the transition to an advertising-based business model, challenges notwithstanding.

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