The more I think about Google's recent introduction of paid channels on Youtube the more significant this event becomes in my mind. [YouTube launches paid channels starting at $0.99 per month
] The reason is that it is an admission of the failure of its online ads. It's an admission that revenue splits with video producers can't cover their costs of production -- even for shows that have tens of millions of regular viewers.
I subscribe to some great science and math shows on Youtube yet I barely see an ad on these high trafficked shows. It all points to an inescapable conclusion: Google is shockingly bad at monetizing online content (and not just video content).
This is Google's dirty little secret,
how bad it is at monetizing online content. It's only bad for everyone else.
When your business model is based on aggregation at massive scale, the small bits of money Google makes on content is multiplied by hundreds of billions, and the results is billions in annual profits.
However, no one else can make money at those rates. Especially any media company that pays salaries to produce content.
The Youtube paid channels announcement is a watershed event.
Google is admitting that online ads don't work for other media companies.
Google ads can't produce what it likes to call, a "virtuous revenue cycle" -- self-supporting media business that are able to invest in new content.
Google advertising doesn't work for newspaper and magazine sites...
Online advertising, as a major revenue source for nearly all businesses: media, startup, or other -- is dead. It only works for Google and other large scale Internet platforms such as Yahoo, Microsoft, AOL, Amazon, Ebay, etc. And for media businesses that harvest their content for free, or have immense traffic such as Mirror Online.
It's all about scale and not quality -- despite Google's pleas for quality content. The simple fact is that quality content doesn't earn more money through online ads. A click is a click, and so is a unique page view -- on any page. It's a currency that constantly devalues original content and discourages new production.