Will Online video sites ever turn into a profitable business ?

Popular online video sites are not making BIG money. YouTube, for instance has not yet turned a profitable business due to poor online video monetization.

We all know how big YouTube is(ranks 3rd after Google and Yahoo) and how fast online video industry is growing as we are all contributing in it(by creating videos and putting them online)

But let’s face it…No matter how popular online video sites are,they are not making BIG money for the owners.

To cope up with the growing expectations of users and high competition,online video sites such as Veoh,Metacafe,Revision3 and our pet YouTube were putting best of their efforts.

Counting from ‘simultaneous video streaming'(which takes a big toll on server expenses) to every web 2.0 feature that you experience on video broadcast/sharing sites today,there has been enormous efforts(majorly money) by all such video sites.Also,such websites spend exhaustively in maintaining their services,unlike content based sites which are much cheaper to maintain.

No doubts,the concept of online video sharing has been a revolution in itself but no service has yet been able to turn their service into a profitable venture.

Want reasons ?

• Videos can only be indexed through tagging. That makes unabusable/accurate indexing much difficult
• As content within videos can’t be interpreted by web crawlers,ad targeting becomes blurred and therefore poor conversions
• Video commercials on television and the internet are applicable to driven systems (tv soaps/shows and internet counterpart such as hulu)
• As the video content is user-generated,any ad insertion disrupts user experience and may cause feeling of unwanted intrusion within users

Although YouTube streams more than five billion videos every month,it falls short in front of much smaller video site Hulu,which streams professionally produced videos,tv shows,movie promos,a conventional format which advertisers are used to.Reports say that Hulu is proving to be a better cash machine than gigantic YouTube.

What’s more bizarre is that even Google(acquired YouTube in October 2006), the biggest money maker on the internet(and an all time path-breaking innovator) hasn’t been able to turn it a profitable investment in the past two years.

And the dreadening nightmare may be turning “paid” for even common usage.

So,here is the million dollar question again…

Will Online video sites ever turn into a profitable business ?

I believe,they will.And very soon(within an year).

Reasons…

• Traffic isn’t a botheration for them.So,tough part of the battle is already won
• Google has been working on new innovative methods to monetize online videos on YouTube. The latest one is selling search results on YouTube to highest bidders.This way,they have replicated the same system they have been following for years within their own search results
• Youtube has also started serving overlay ads on embedded Youtube partner videos
• There are companies like Digitalsmiths,Auditude and Viewdle who are serving as video indexing and effective ad targeting services

Our prediction

Within an year or so,we will see Youtube as a profit making venture.Most of other popular video sites will follow Youtube’s methods of monetizing online videos.(they will definitely save on R&D)