YouTube Premium? 11% Say They'd Pay, Could Yield $100m
IBM has released a survey of 2400 consumers, called the End of Advertising Survey, that found that %11 of respondents would pay a small fee to remove advertisements from their online video viewing experience. A YouTube Premium subscription option? It could make sense.
The Context
It's widely believed that the web 2.0 era marked the end of paid content and software - that advertising would now fund all future media if not online activity in general. As online advertising begins to take hold meaningfully, though, some number of people wish they could go back to the good old days of paying a small sum.
This will likely be an even more pertinent question when the wall separating billions in TV advertisement comes down, flooding the world of online video. Online video is already a lot more mainstream than many web-heads admit, and the mainstream is more savvy than we might think. Tivo has been a paradigm changer and I have no doubt that a substantial percentage of people will pay to remove ads in a media future increasingly centered on online video. Give me access to my viewing history, preferences and recommendations and I'll happily pay too. Likewise, some users may be willing to pay for an ad-free publishing platform, increased length limits and higher quality playback. I've long been an advocate for paying for software, but now the 89% of the people who say I'm crazy can know that IBM says I am not alone!
The Money
E-Consultancy.com did some math and argues that at $2 per month, or $24.95 per year, 10% of YouTube's 50m unique users per month would equal a $137 million annual revenue stream from subscriptions. We did a little more math over here and found that advertisements, on the other hand, at a very generous rate of $10cpm would equal $38m in annual revenue from those 11% of YouTube's viewers. In other words, if (and this is a big if) all these numbers were correct then YouTube could increase its proffits by $100m annually by offering a premium subscription.
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Let the numbers speak. I do think this is ways away though, but certainly a good business model.
I bet some of the producers on YouTube starved for attention might be willing to pay a little extra to be featured more regularly. If paying = more views, I'm sure there will be more than a few takers. Kind of like paying to get your poetry published. Oh, wait. They already to this with 'Promoted Videos'.
But paying to watch? Eh. Probably not. Not me, anyway.
Why don't they set up a tip jar system? And take a percentage of 'tips'?
They'll find a way to monetize that content one way or another, goshdarnit.
Those numbers seem awfully optimistic. The general stats I've heard for freemium type sites is close to a 100/1 ratio of free to pay users.
Mark, the google checkout integration with youtube for nonprofits is kind of like a tip jar. As is the recent integraion of YouTube into Adsense.
Michael - I think video ads may be particularly annoying, though :)
So 11% of people are too dumb to install AdBlock Plus?
As advertisements become more pervasive and invasive, I predict a backlash. That's why I don't have any on my venture capital database.
@ Michael Buckbee - I remember reading that Web services should expect one in every thousand visitors to convert to a paying customer...Might have been 37Signals.
Paying to get more space for the video uploads would be awesome.
Have they increased the limits already?
According to Ryan Carson, web apps should plan for 1-2% paying customers: http://www.thinkvitamin.com/features/webapps/will-your-web-app-make-money
Granted, no idea where that figure comes from and it isn't talking about ad free content subscriptions, but rather value added web app service fees.
This is a great idea. Some people or businesses have more disposable income for entertainment, some of which could be business related.
However, everyone must be aware that to use the subscription model, they will have to sign in regardless of which computer they are using. So their histories could be subpoenaed, as well as the IP addresses from every computer they used to sign in.
Even if they clear their histories - it is still available somewhere.
The web makes it convenient to offer no-advertising content everywhere. The numbers indicate that it would not be costly to subscribers if they pay what their eyeballs are worth. There is some risk that advertisers themselves will be so negative that they'd quit buying ads.
The answer to such questions is its time to try the model out. More on my blog:
http://smoothspan.wordpress.com/2007/09/28/memo-to-doc-searles-why-not-pay-for-the-no-advertising-nirvana/
I am not sure of the data. There is no way people from developing world are going to pay $2 per month (maybe, they will if US dollar keeps sliding :-)). When you take the world audience into account, I doubt 1 in 10 will be willing to pay.
I'd pay if it could mean a stop to commenting from illiterate and immature teenagers.
Cant happen unless they limit the premium package to only those videos from partners they have licenses with. Otherwise they would be violating the DMCA.
The DMCA always seem to get in the way of real progress, but thats the price they pay for hiding behind it
m
@ #14:
Im not quite sure what the DMCA has to do with YouTube offering a premium package.
Im no U.S. Citizen but as far as i know the DMCA is a set of rules regarding copryight laws.
How does removing ads from the site collide with copyright law?
@ #14: It's not the ads, it's the premium (HD) material.
No edit function... I meant @ #15