The biggest challenge facing both video hosting sites such as YouTube, and video producers themselves, is how best to make money from the amount of views these videos gain.
The issue isn’t as cut and dried as just sticking some ads on and hoping for the best, for a variety of different reasons. In fact, the whole business is so complicated, many people just accept they aren’t ever going to make any money out of it.
First of all, you have the different advertising methods, with video ads, pre-roll post-roll etc, or text ads on the video page amongst the many choices on offer to you. Then there is the fact that YouTube won’t even advertise on UGC unless it’s checked for copyright violations.
The latter rule, in place to prevent YouTube getting sued… again, means that only an estimated 3% of video on the site can actually have adverts running alongside them.
If that’s not reason enough to embark on producing more professional videos for the Internet, a new report out from The Diffusion Group, which looks at the CPM (cost-per-thousand) rates, should make it abundantly clear what the future is.
According to TV Week, the report suggests that CPMs for professionally-made long-form online content are $40 today and will reach nearly $46 in 2013. CPMs for short clips are clocking in at about $30 and will rise to over $34 in the same time frame.
Compare that to user-generated video clips, which currently garner CPM rates of around $15 today, a figure likely to only rise to about $17 in 2013. That’s a huge difference, and show that if money is the ambition, professionally made video content is king.
UGC Vs. Professional Productions
The video advertising market is estimated to be at about $590 million today, but that is expected to rise to more than $10 billion by 2013 as advertisers finally switch on to the benefit of the medium, and video sites start monetizing more successfully.
It could even be argued that UGC will fall by the wayside in years to come, as despite accounting for almost half of the video streams we watch, they only make about 4% of the revenue on offer. Professional video soaks up the other 96%.
Expect to see sites such as YouTube do more deals like the Lionsgate one. This could in turn mean Hollywood comes crawling back to the sites, as the movie and TV studios suddenly see dollar signs in lighting up the way.