YouTube Case Study and Widget Viral Marketing

I feel YouTube brought the popularity of viewing videos online with the growth of internet and technology. It had been the fastest growing website in Internet history with an average of 100 million videos streamed and 65,000 new video clips are uploaded per day.More than 13 million unique visitors per month. An average user spends 30 minutes on YouTube and most uploaders are repeat visitors themselves, within the age group of 18 to 35 year-olds. 58% of Internet videos are watched on Youtube, 20% to 30% of traffic volume is from the US and 30% to 40% of the content is copyrighted. There is a clear correlation between eyeballs and copyrighted content.

YouTube was launched when social networks started to become popular, when the bandwidth became cheaper and people wanted an interactive alternative to TV. YouTube, one of the most successful exits of the Web 2.0 era, needs little introduction.The cheap digital video cameras could now be connected to computers, thanks to USB 2.0/Firewire becoming available on most personal computers. Also, use of cell-phones with video cameras became more prevalent. A post dot-com generation was seeking an online experience that placed a lot of emphasis on entertainment. It became possible to store, manage and serve large repositories of content at a fraction of dot-com era prices.

YouTube’s single biggest contribution is that it brought into the mainstream of the concept of sharing videos online. YouTube shot into limelight when Google acquired it in Oct 2006 for $1.65B (in stock), the largest exit for a consumer Internet company in 2006 and Google’s biggest acquisition to date. On a typical day, over 100 million video streams are watched on YouTube.

Key success factors

Created a better user experience around sharing video clips online.

Online videos definitely existed before YouTube came into vogue. However, uploading videos, sharing and watching them was quite cumbersome. The primary issues were:
• Lack of a viable storage platform: Video files were too large to be e-mailed. One of the alternatives was to upload them to a generic file-hosting service. This option was fraught with several issues including restrictions on file sizes imposed by storage providers (unless the user had a premium, paid account) and a poor to non-existent interface to share videos with friends and family.

• Mediocre watching experience - Viewers would typically need to wait for the entire video to download before they could start watching it. Users needed to install the appropriate video player, the free versions of which often behaved like ’spyware’. Even with the right video players and ‘codecs’, there was a fair chance that downloaded video would not play.

• Fragmented viewing experience - Assuming that the user managed to download and play one of these videos, i.e. there was nothing to connect it to related video clips,

While the technology platform used by YouTube was not particularly remarkable, it was designed to solve the problem at hand. The technology concept was to encode videos in the Macromedia Flash format and take advantage of the millions of computers which already had the Flash player installed on it.

Distribution of popular content (often copyrighted) drove adoption

Distributing popular and hard-to-find video clips was clearly a success factor. Clips of the popular, long-running television show, Saturday Night Live was a particularly significant example. A free-form platform that allowed users to upload content had to contend with copyright violations. While this is one of the oft-repeated complaints about YouTube, it should be remembered that the founders decided to go ahead with the idea despite the eventual failures of the likes of Napster and Kaaza. While the ethics of such a strategy would require a lengthier discussion in an of itself, the founders clearly took a chance with something that other entrepreneurs might have balked at.

Viral customer growth due to widget marketing

YouTube allowed users to easily embed any hosted videos on web pages or blogs. This turned out to be particularly popular with social-networking websites, especially MySpace. The inbound links from these ‘widgets’ also helped YouTube increase its page rank on Google, thereby driving traffic via natural search..

Choose the right technology platform for the desired user experience

While the technology platform used by YouTube was not particularly remarkable, it was designed to solve the problem at hand. The technology concept was to encode videos in the Macromedia Flash format and take advantage of the millions of computers which already had the Flash player installed on it. When Macromedia launched Flash 7 with video playback capability, YouTube was among the first to exploit this feature. Further, based on the team’s past experience working for PayPal, they were able to develop a platform that scaled quickly to handle the viral growth in content and traffic.

Launch strategy and marketing
Like most startups in the consumer Internet space, YouTube did have to survive a couple of missteps before discovering the winning user acquisition strategy. The founders started work on YouTube in Feb. 2005 and a public beta was launched in May 2005. YouTube started out as a video clone of HotOrNot.com targeting the young adult market. However, the initial site was attracting very little traffic. A site revamp in June 2005 focused on:

1. Creating a general-purpose video-sharing platform
2. Increasing number of views by offering ‘related’ content
3. Encouraging interaction between users
4. Offering an external video player that could be embedded on a site like MySpace.com

The ability to embed the external player on any web page turned the tide for YouTube. Once MySpace.com users started adopting YouTube en masse, MySpace.com blocked video links to YouTube. However, MySpace caved under pressure from MySpace users and reinstated access to YouTube content.

The other key driver to YouTube’s user acquisition was the frequency at which popular video content was distributed in a viral manner. According to one YouTube employee: “Once traffic picked up, roughly every two weeks or so a video would become wildly popular. Soon the time between these super-hit videos started shrinking. The site took off at a scorching pace.” Video footage of the Southeast Asian tsunami resulted in one of the largest traffic spikes. Other popular clips included Jon Stewart on Crossfire and the infamous Janet Jackson Super Bowl video.
YouTube most likely had both viral and SEO (Search Engine Optimization) factors working for it. Searches for 7 out of 10 of the top-10 popular music albums show up as YouTube hits on the first Google search results page, indicating the SEO factor at play.

Exit analysis

In Oct 2006, Google acquired YouTube for $1.65B in stock. The working arrangement is that Google will focus on the technology, while the YouTube team will focus on the content. Google has helped to make YouTube videos more searchable, including tighter integration into Google’s video search product. As cameras become more and more powerful, YouTube video resolution will need to keep pace by encoding videos at higher and multiple bitrates – this where Google’s infrastructure advantages come into play.

The reasons behind Google’s acquisition seem quite intuitive. YouTube falls in line with Google’s strategy of converting user visits to its properties into contextual advertising revenue. YouTube’s huge user-base combined with its own user base gives Google formidable market power and the ability to influence consumer behavior. Also, while the prospect of YouTube being acquired by one of the media giants was slim, the acquisition did serve to deter competitors like Yahoo from making further inroads into the online video-sharing market.