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Red Herring reports that video-sharing site YouTube has raised an additional US$8 million from Sequoia Capital. It will use the funding to support rapid expansion that includes about 35,000 videos uploads per day and a total of 35 million videos watched daily by about 6 million users.

This Washington Post article further analyzes the popularity of online video, and AOL recently expressed its bullish stance on Internet TV. Our recent IPTV White Paper and online video Advisory both dig deeper into the space.

Monetization of online video is a big question mark for YouTube and others such as Google Video that are experimenting with different models.

From the Red Herring article:
Advertising will continue to be the major way to monetize video, accounting for 46 percent of revenue in 2010, though subscription and la carte models are set to take a bigger chunk than they do now.

Based on my analysis, it’s unclear whether consumers largely prefer to pay a la carte or by subscription or to endure advertising. A video panel I moderated at The Kelsey Group’s Drilling Down on Local conference agreed that we are in a wild west phase of online video, where nothing is known and there is a lot of experimentation (an Advisory on conference highlights, including this panel, is in the pipeline). The range of monetization strategies out there now supports this.

When I spoke with Yahoo!'s director of media and desktop search, Bradley Horowitz, in the fall, he said as much (Yahoo! has a number of online video initiatives under way).

"This is all in the spirit of speculation, but I think you'll have pay-per-view, I think you'll have subscription, I think you'll have premium service, and I think you'll have ad-supported models. It's too soon to say what is going to work, so we are going to be very playful and exploratory."

Josh Martin, an associate research analyst at IDC, told Red Herring that there will be additional ways to monetize online video that include premium charges for higher quality streams, offline viewing and portable access to content.

Currently, the biggest challenges are content aggregation and ad delivery. Will marketing be delivered with video content as pre-roll videos or as accompanying text ads? The latter makes it easier to track clicks, but the former is more conducive to the content format. These challenges will be hammered out over the next few years as the players in this space continue to grow rapidly and experiment as much as their capital bases will allow them to.

YouTube just got its allowance, so watch it closely.

This Post Has One Comment

  1. YouTube’s very low ratio of upload activity to viewing activity is similar to low contribution ratios across many Web 2.0 user generated content sites (tagging sites, review sites…) Are such user generated content models sustainable if the average user prefers to view other users’ content, rather than contribute content him or herself?

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