Studio20profileBY 
ON APRIL 23, 2015
video-advertising-market-youtube
Ten years ago today, a grainy, 18-second video of a young man at the zoo was uploaded to the Internet. The cinematography was suspect at best, placing the man in the center of the frame, obscuring the two elephants behind him — which would seem to defeat the purpose of the clip. After all, there’s nothing remarkable about the man in the windbreaker; elephants are much more interesting. Nor does he have anything profound to say about the pachyderms at his back, explaining that the cool thing about elephants is that they have “really, really, really long trunks.”
But then that’s always been the point of YouTube. “Me at the zoo,” the first-ever video uploaded to the platform, fittingly emphasizes the human and the commonplace — two qualities that would guide YouTube’s growth throughout much of its first decade of existence. Not surprisingly, most of the articles commemorating “Me at the zoo”‘s anniversary today missed the point, calling the video “mundane” and “really boring.”
Of course today YouTube has a much more glamorous reputation than anyone who watched “Me at the zoo” in 2005 could have ever expected. The site has grown from a modest office above a San Mateo pizzeria to a $40 billion video platform that adds 300 hours of new content each minute, uploaded by everyone from suburban teenagers to Taylor Swift to Major League Baseball. It’s bred an entirely new generation of celebrities who found massive audiences on the platform. Before long, people stopped using the term “YouTube-famous” as the term “famous” now suffices. Among teenagers, YouTube stars are considered more influential than Hollywood actors and actresses.
But a platform doesn’t grow that large in size and influence on accident. There are venture capitalists, public shareholders, and — in YouTube’s case — a massive parent company like Google that support it along the way. And when these stakeholders inevitably demand a return on their investments, some of the qualities that made these open, democratized playgrounds of creativity so attractive to users in the first place are jettisoned in favor of boosting profits.
While YouTube brings in more revenue than ever before, this “maturity” has led to tighter controls on what content can or can’t be uploaded — sometimes for good, sometimes for bad, but always in ways that benefit the most powerful and well-lawyered rights-holders. If a big film studio, for example, accuses you of copyright infringement and asks YouTube to remove your video, don’t expect to win that battle without hiring legal representation, even if the law is firmly on your side. Just ask this guy.
What’s more, the company recently suffered intense criticism from some of its most iconic artists over troubling changes YouTube made to its contracts with creator-partners, which placed enormously onerous restrictions on how they monetize their content — both on and off YouTube. Meanwhile, although the company’s revenue continues to grow, hitting $4 billion last year, YouTube merely broke even for the year, according to a Wall Street Journal report.
And so with a number of tech firms both old and new jockeying to own the future of digital video, and with many of YouTube’s creators feeling abandoned and disillusioned by its new revenue-focused policies — policies that are as disappointing to Wall Street as they are alienating to artists — YouTube’s position as the reigning player in online video is far from rock-solid. In ten more years will what’s left of the tech literati be celebrating YouTube for notching another decade of video dominance? Or will it be an occasion for drippy remembrances of yet another web 2.0 relic that changed the world before losing everything? Will our children’s children even know about Shreds videos?
***
Stop me if any of these names ring a bell: Connor Franta? Brittani Louise Taylor? Kian Lawley? Yeah, me neither.
Now, is there a teenager nearby? Whom it wouldn’t be creepy for you to ask? I guarantee you he or she will know at least one of these names.
On YouTube, the three creators’ videos have been watched 218 million, 219 million, and 145 million times, respectively. And all three of them are among the creators represented by Andrew Graham, one of the top talent agents of the YouTube age. Graham has spent the last three years working at agencies like Fullscreen and now Big Frame that represent digitally-native talent. And during this time he witnessed firsthand the evolution of YouTube from a weird and wild platform that few of the old media and ad execs took seriously to an enormously powerful engine for making huge stars and huge ad dollars.
“When was the tipping point in the space? It’s probably been in the last two years,” Graham says, citing two major shifts in the industry: The first was an increase across-the-board in digital ad spending, which has risen considerably even if it still pales in comparison to the dollars spent on television marketing.
“Even when TV spending dips a little bit, digital spending jumps up in leaps,” Graham says.
And the second was a realization among creators that they’ll never get rich by simply living off checks from YouTube.
“Here’s someone that has a business manager, a publicist, me, an entertainment attorney,” Graham says. That may sounds like a lot of extra baggage, but these support teams can help their young clients land lucrative endorsement deals. And as more and more creators express dissatisfaction over the revenue share they receive from YouTube, these endorsement deals are where they can make serious money.
Trevor Moran, for example, a YouTube star and former member of a supergroup managed by Graham called Our 2nd Life, netted around $1,500 from the teeth-straightening brand Invisalign for simply turning on his camera and declaring, “I use Invisalign!”
And low revenue shares aren’t the only source of frustration for YouTube creators. In January, YouTube announced major changes to its partner-creator agreement ahead of launching its Spotify-style streaming service, “Music Key.” Just months earlier, the company had been accused of bullying independent artists into signing up for its service at below market rates, threatening to remove their videos from YouTube’s free platform if they refused to play ball (the company since backpedaled on that stance). And now it was taking a hard-line on some of its most prolific and faithful creators, mandating that anything an artist uploads to YouTube will be automatically included in the Music Key subscription service. That includes music uploaded by third parties without the artist’s consent. This is rightfully upsetting to artists because it’s common for creators to upload some of their music to YouTube as a promotional gambit, and then sell the rest of it on Bandcamp or iTunes. YouTube’s new agreement would prohibit such behavior.
All these limits on creator control come at a time when the digital video space — thanks to a huge increase in mobile video consumption — is getting extremely crowded. After implementing auto-play videos in its mobile app, Facebook’s daily video views skyrocketed from 1 billion to 3 billion between June 2014 and January 2015, putting the company in a position to rival YouTube’s 4 billion daily views — which a year ago would have been unheard of. Twitter is also experimenting with auto-play videos which will undoubtedly give a boost to its six-second video app Vine, which is a favorite among millennials.
Speaking of millennials, the clear darling among that demographic is Snapchat. And according to Business Insider the consumption of videos along with longer collections of photos have outpaced the number of photos sent. Meanwhile, Yahoo is looking to take on YouTube by pivoting Tumblr into a video platform and is planning to use one of its only advantages — its massive cash stores — to poach YouTube stars away. And finally there’s Vessel, a video startup from ex-Hulu CEO Jason Kilar that’s raised $120 million and aims to offer deals to video stars that are potentially far more lucrative than YouTube’s, thanks to a unique subscription model that asks users to pay $2.99 a month for early access to content.
None of these competitors have the same online video cachet and entrenched community of viewers that YouTube has. But when consumer adoption and ad spending is on such a steep uptick in a particular space, it’s shocking how quickly a market lead can erode. Just ask Myspace.
***
If anyone can forecast YouTube’s future prospects it’s Graham. So after ten years of being synonymous with “online video”, can YouTube retain its crown for ten more years?
Maybe. He believes YouTube’s position is still very strong. That said, he’s definitely sensed a shift in attitudes from creators toward YouTube, particularly in the wake of the controversy over the new partner agreements.
“No one in my fold is fleeing from YouTube but, look, the dialogue is evolving,” Graham says. “I don’t think they’re going to necessarily lose their partners because of that, but it brought into question the type of partner Youtube is. Initially, to a lot of creators, they felt they could live an entirely independent life through creative ambitions. they felt like YouTube was there to support [them], and now it seems like this is a real business thing, and now YouTube is getting a little greedier.”
Creators will and are using other platforms, he says, but there’s an additive component to using competitive apps that won’t necessarily come at the expense of YouTube.
“I think that the stickiest platform they’re paying attention to right now is Snapchat,” Graham says, but that it’s the most valuable to creators who have already built an audience on YouTube. “[Snapchat] only has so many legs when it comes to being a platform from which new voices are being born.”
As for Facebook, it’s impossible to ignore the platform’s enormous growth in video consumption, but as a way to reach young fans it’s not as essential a channel as its massive user metrics may suggest. He tells me about one young client who didn’t even have a Facebook page until it came time to promote a film he made.
“It took old media to motivate him to go onto Facebook,” Graham says. Are you feeling old yet?
Meanwhile, he hasn’t heard many rumblings about Yahoo’s video ambitions and has little to say about them except that “Yahoo has a lot of work to do.” No kidding.
And finally, he’s interested in Vessel’s play, particularly because it promises a concrete metric surrounding ad revenue that surpasses YouTube’s — of course it will also need to attract enough user subscriptions to deliver on that promise, which is hardly a foregone conclusion.
In the face of these competitors, along with a string of questionable moves that threaten to alienate artists, Graham remains bullish on YouTube. Because even if YouTube fails to offer the best ad shares or the most attractive deals that prioritize artist control, it’s already so entrenched in the creator and consumer communities surrounding online video that it will remain an indispensable marketing tool. And again, the real money won’t be made from YouTube directly but through endorsements and through other lucrative brand-building exercises that exist off-YouTube and in some cases off-digital platforms entirely.
Franta, for example, wrote a book that made it on Amazon’s Top 20 Best Sellers list. He founded a coffee company. Franta has even been selling compilation CDs of his favorite artists — yes, physical CDs — and around 300 of them a week. If there’s stronger evidence for the power of these young stars than their ability to convince people in 2015 to buy the most-maligned media format of the past 100 years, I can’t think of it. Graham is right when he says that videos are just one component of the businesses he’s building around young celebrities, which include clothing lines and other physical lifestyle products on which kids will blow their allowances and summer job savings.
“And I think YouTube,” he adds, “will always be part of the formula from a marketing perspective,” he adds.
***
Ten years after Karim took that fateful trip to the zoo, YouTube has evolved in more ways than I can count. It’s become a legitimate star-making vehicle for young celebrities whose fame is an utter mystery to anyone under the age of 20. It’s no longer a lawless land of broken copyrights — you’re as likely to find an official upload of the new Jay-Z video on the platform as you are a home movie of a dancing man in a horse mask cooking wild mushrooms. Meanwhile, its ambitions to take on Spotify and Pandora have turned a site that was once a reflection of everything great and open and democratic about the web into one of the creative industry’s worst corporate villains.
YouTube may survive another ten years — it just may not be the YouTube my generation knows. I only hope that the platform doesn’t lose its soul completely, and that there’s always a place for cat massage videos and whatever this is:
[illustration by Brad Jonas]
Studio20profile
David Holmes is Pando's East Coast Editor. He is also the co-founder of Explainer Music, a production company specializing in journalistic music videos. His work has appeared at FastCompany.com, ProPublica, the Guardian, the Daily Dot, NewYorker.com, and Grist.
You can follow David on Twitter @holmesdm