The number of users of online video websites has been growing very rapidly over the past few years. In fact the popularity of online video websites has increased so much that a lot of people are watching lesser television then what they used to. But video websites continue to make large losses due to high bandwidth costs and copyright claims. Even sites like YouTube which has millions of subscribers are struggling to make a profit.
My research has attempted to study the existing revenue models for video websites and explore the possibility of introducing new strategies to increase revenue. As most of the revenue for these sites comes from advertising currently, I have tried to assess user responses to online advertisements and suggest ways to increase their effectiveness. The viability of the subscription and donation models for video websites has also been explored.
This was done through Quantitative Techniques i.e. administering a questionnaire to 100 respondents who watch online video at least for an hour every week. A pilot survey was also conducted to test the effectiveness of the questionnaire. Statistical methods like cross tabs were then used to analyze the data and derive insights.
It was found out that the current advertisements on online video websites have very low recall value and do not engage the users sufficiently. I have suggested steps through which this could be changed. Also the subscription model could be implemented currently by charging for some additional features, but keeping the basic features free. Among the different types of content currently movies, music and television serials seem to be the easiest to monetize. There is also some scope for monetizing sports content.
People also seemed receptive to the idea for donations to YouTube. Thus by using a mixture of all the above models more proficiently, YouTube stands to increase its revenues significantly.
“This is an interesting time of constant change and innovation, and things will keep changing until we find equilibrium. Trying to understand online video today is like taking a Polaroid photo of a moving train—it’s a blur. Every day we uncover a new behavior or out a cost issue.”
-Vivi Zigler, President, NBC Universal digital entertainment division, (Streaming Media, 4/09)
According to readwriteweb.com the different types of online video websites could be classified as
* Video Sharing – Sites where you can watch, upload and share videos e.g. YouTube, Metacafe, Yahoo Video etc
* Intermediaries – Sites that connect publishers, video creators and advertisers e.g. NBBC, VideoEgg etc
* Video Search – Sites to search for videos e.g. Google Video, AOL, Pixsy etc
* Video Ecommerce – Sites that allow you to legally stream latest movies and TV shows e.g. MovieFlix, Guba etc
* Video editing and creation – These sites can be used to edit videos and serve as a complement to video sharing websites e.g. JumpCut, EyeSpot etc
Online Video Streaming has grown immensely popular over the past few years. An increasing number of users have been watching their favorite television serials, movies and music videos online. User generated content through sites like YouTube have also become a rage among the youth.
The effectiveness measuring capability of online advertising seems to be a boon for all marketers. At a time of economic uncertainty and increasing dissatisfaction with the accountability of broadcast TV advertising, online video advertising is delivering double digit click through rates and high levels of attention and engagement.
* Launched just three years ago, YouTube is one of the web’s top five websites; hosting 73 million video clips watched hundreds of millions of times a day.
* Print titles ranging from the Financial Times and Sun to Elle and Time have been as quick as dedicated online publishers to put video at the heart of their editorial offer.
* Even in India, viewers are able to watch the latest news in video on the websites of Times of India and Hindustan Times
* Video product demonstrations and reviews are becoming a key driver for ecommerce services such as Cnet TV, Comet TV and Borders BookZone.
* According to IDC, U.S. consumers will spend more than $9 billion on online video content in 2012
All this, however, has not translated into large revenue for online video websites. Google which has acquired YouTube are struggling to come up with ways to monetize it. Recent steps taken in this direction include setting up partnerships with big media companies and letting content creators sell their own advertisements. Hulu a joint venture between Newscorp and NBC shows short video ads before, during and after its programs which include recent TV content
But these sites also incur huge costs in providing huge bandwidth which is a prerequisite for online video streaming. Licensing content is also a major cost for most of the websites. Until now sites like YouTube have sought safety in the ‘safe harbor’ law (Section 512c), but broadcasters are now seeking their pound of flesh as was seen in the recent litigation filed by Viacom.
While YouTube has access to the deep pockets of Google and Hulu has the backing of major studios, these websites cannot continue to depend on just advertising as a source of revenue. If they have to exist they would need to find out innovative ways to earn additional revenues while also trying to increase advertising revenue to ensure profitability.
Accessing videos online has gone main stream at an extraordinary pace. (Nielsen, 2009)
With the increase in penetration levels of internet, other demographic groups seem to catching up with young males between the ages of 18-24 who were thought to be the primary users of online video. This includes female users especially moms and the older population who are aged above 50 years. The increase in the number of niche video websites targeting these users like essence.com, Univision.com etc proves this fact.
There is no evidence that the Internet is cannibalizing TV use. In fact, Nielsen studies have shown that high consumers of TV are also high consumers of the Internet: high-intensity media consumers are high intensity media consumers regardless of media type. (Nielsen, 2009)
While there have been huge improvements in the quality of internet video, there is still some catching up to do to reach the levels of television. Currently internet video performs a complementary role to television, with users watching their favorite television shows online if they are not able to watch it on television due to time and geographical constraints. But an increasing number of younger viewers prefer to watch content online because of the greater degree of freedom involved, which includes forwarding advertisements and rewinding portions of the show that did not make sense the first time.
2.2 Audience Engagement
Forrester Consulting (2008) defines ‘Engaged Viewer’ as an online video viewer who watches online video more than one hour per week. In a study conducted in 2008 among the American audience it found that the growth of social networking websites like MySpace and Facebook has resulted in more people spending an increasing amount of time viewing online video and hence qualifying as engaged viewers. Majority of these users find the videos that they want to watch either through browsing, site searching or referral by peers. These users usually watch an entire video and do not stop it before it has finished.
Most of these viewers are watching amateur clips uploaded by other users on sites like YouTube. Movies, News, Sports and Music are the other popular content that viewers seek online. The other engaging activities that these users are involved in include posting comments, sharing videos and social bookmarking.
The content on online video sites can be categorized into three categories i.e. Snippets, Boutique and Catch- Up (Gibbons, 2008). Snippets consist of content which is viewed for amusement or to kill time. Boutique is more information and task driven content. Catch-Up mainly comprises of stuff like TV serial episodes which users can catch up on online.
In a survey conducted by Liverail (2008) among close to 400 media users in the US in the 18-24 age category it was found that frequent viewers consume an average of 273.1 minutes of online video content per month as against 195 minutes during 2007.
One of the major reasons for this is the increase in the popularity of websites like Hulu that stream long form content (full length television shows, for instance) as compared to short duration user generated content (Forrester, 2008). Also the number of viewers who watch movies on online streaming websites has increased drastically due to increase in broadband speeds. Time spent by a user on a video is usually calculated after the user has pressed the ‘Play’ button on the online player. The time for which the user pauses the video is not included in the Time Spent metric
Forrester Consulting (2008) further classifies the engaged viewers into four categories ( 1):
* Watchers – This group contributes the least amount to the total video views, do not watch different types of video, prefers TV to online video and is not likely to share videos online.
* Controllers – They contribute a significant amount to the total video views, like different genres of video, prefer online video to TV, are likely to share and rate a video
* Connectors – While they comprise of the least percentage of engaged users they contribute the maximum amount to the total video views, watch online video most of the time and are responsible for most of the video sharing that happens online.
Advertisers need to target the Controller and Connector segments as they watch the most online video and hence are more likely to watch advertisements. They are also the most receptive to advertisements and understand it is a small price to pay for watching the content free. But in order for the advertisements to have more of an impact they need to be entertaining, not intrude on the video viewing experience, non repetitive and effectively target the viewers.
Non-video advertising such as banners and pop-ups are generally unpopular with people engaged with this content unless related to the video. Furthermore, the intrusive nature of advertising can make some viewers impatient. (Gibbons, 2008)
Online video sites need to ensure that the advertisements on the site do not annoy the viewer. The advertisement need to be made relevant to the video being viewed and also should be entertaining. If the viewer perceives the advertisements to be annoying then he may switch to another site. Also advertising around user generated content in YouTube would get a more negative response from the viewers since the clips are shorter in duration.
Not only is the Internet adding incremental reach to a TV media buy, but it is also creating significant additional effectiveness. (Nielsen, 2009)
Watching an advertisement on television and then seeing a banner of the same ad on an online video website increases the chances of the message of the brand getting to the customer. Hence it recommended to reach the customers in as many different touch points as possible, to increase the effectiveness of the communication. Online video website provides another avenue for marketers to do this.
TV manufactures see online video to be the future of content distribution (Liverail, 2008). Hence the next generation television sets have been made compatible with broadband to facilitate the delivery of video content through the internet. This would enable television viewers to watch on demand content from websites like Netflix and also revolutionize TV advertising by tailoring it according to the viewer’s interests.
The Liverail report has highlighted the following problems as preventing online video websites from realizing their full revenue earning potential
Publishing platforms and advertising servers provide different s for the performance of the advertisements
The larger number of advertising formats online like pre roll ads, non linear non interactive ads has created a lot of confusion in the advertisers mind
The industry has failed to adopt standard units and metrics though the Interactive Advertising Bureau (IAB) has consistently tried to set standards
No standard protocols have been defined for communication between the video players and ad servers.
Today, advertising is the main source of revenue for Web 2.0 sites. Effective targeting is given as one of the major reasons as to why advertisers should advertise on websites. However advertising revenues are weak and disappointing, especially considering their large audience (Beuscart, 2009).
One of the major reasons for the above is that marketers are still not comfortable with the online medium. Since websites like YouTube depend a lot on user generated content advertisers are not sure about the kind of content that their brands would get associated with. In their preoccupation with advertising, marketers forget the various innovative models and different advertising formats that could be put to use to catch the attention of the consumer. It is by using such models that online video websites could increase their advertising revenue.
Online video websites offer their services and content to customers for free because of low entry barriers and large amount of competition. Three revenue models that can be used to supplement advertising could be
· Freemium – The basic functionalities of the site are available to the users for free, but a fee needs to be paid for access to advanced functions. E.g. Pro accounts on Flickr.
· Donations – Sites strike an emotional chord with their loyal users and seek donations from them e.g. Wikipedia aims to collect 7.5 million dollars from its users in the form of donations and has already collected 1 million dollars
· Transaction Fees- Sites can charge a transaction fee for directing its users to related product and services. In the case of YouTube, users could be directed to purchase music and movies.
Revenue models for online websites (Beuscart, 2009)
In the future as online video websites like YouTube and Hulu further establish their presence, they could also move to a subscription revenue model. Also for popular content a pay per view model may be implemented where users would have to pay for a single access to a video clip.
Advertisers prefer Hulu to YouTube because the former allows users to watch full length television shows and thus engages users for a longer period of time. YouTube also seems to be moving in the same direction, by tying up with major studios for content. Recently they signed a deal with Time Warner to furnish clips of movies, television program and news content from Warner Bros.
But that doesn’t mean that YouTube is shifting its focus from user generated content. Recently the site started offering popular content creators a share of the revenue, in order to boost good content. YouTube offers a license that will allow the site to sell advertising around the content and share the revenue with the content creator. But in the future this step could lead to problems in the future with popular content creators demanding minimum guarantees or higher licensing fees.
Another initiative taken by YouTube is to allow the big media companies to sell their own advertisements. Currently CBS is allowed to sell their own advertisements along with their content on YouTube channels. This step seems to be very attractive to the media companies which have a lot of content as they will be able to leverage YouTube’s reach to sell their own advertisements at higher rates.
According to paidcontent.org, YouTube is also allowing users to decide on the kind of advertisements that they want to watch. Viewers could choose between watch four advertisements in between a video clip or watching a pre roll advertisement that would be shown before the clip starts playing. Viewers could also choose between two different pre roll ads. This will make viewers more receptive to advertising as they are the ones selecting what they want to watch. Also advertisers would be forced to make their advertisements more entertaining, so that viewers actually watch them
All the research done in this area is for internet marketing in general. There is very little research material on the plausibility of alternative/ complementary revenue models for online video websites, as well as what the pros and cons are for each model. Also it needs to be explored if the online video websites could do anything more to increase their revenues.
There are different types of advertising used on video websites such as banner, pre roll, contextual overlays etc. But there is a dearth of research that has been done to how users react to these different kinds of advertisements, whether they respond more positively to any format in particular or whether they find advertisements on the site obtrusive. This would help online video websites to become even more attractive to marketers and also increase their advertising revenue.
YouTube has introduced some initiatives to increase revenues recently like tying up with major studios for content, paying popular content creators and letting viewers choose the advertisement that they want to watch. But some research is needed to find out if viewers are aware of these steps and whether they are responding positively.
To study the existing revenue models of online video websites, analyze their efficient and limiting features and explore the possibility of introducing new strategies to increase revenue
To assess user responses to advertisements on online video sites and understand whether the presence of advertisements influence their decision switch between sites
To find out ways to increase the effectiveness of advertisements on online video sites
To assess user responses to the new initiatives taken by online video sites to increase revenue
To suggest the major measures that can be adopted by online video sites to increase revenue.
The research was executed in 2 phases
The exploratory phase of the study consisted of secondary research to find out how do online video websites currently earn their revenue and what do they plan to do in the future to increase it. Also recent trends in online advertising were explored and an analysis was done if they are applicable for video sites. The various engagement points for viewers on video sites would also be explored.
This phase included Quantitative research using a questionnaire. A pilot survey was conducted to test the effectiveness of the questionnaire. A copy of the questionnaire is appended to this report (See Annexure 1)
Since this study intended to explore the response pattern with respect to advertisements in the on line video medium, the universe is constituted by people who watch online video for 1 hour a week and fall in the connector or controller segment. Hence, we used the purposive sampling method and administered the questionnaire on-line to 100 purposively selected respondents who fall in the above two categories. Through the pilot we have identified graduate and postgraduate students as two connector/ controller groups. We have employed simple statistical methods to analyze the data and interpret the results.
This dissertation is aimed at helping online vide websites like YouTube, who are struggling to make a profit. Currently Google spends about 711 million dollars annually on bandwidth and licensing costs for the site, but earns only 240 million dollars in annual revenue. Considering the amount of users and the popularity of these sites it seems that not enough has been done to generate revenue for these sites.
This dissertation aims to analyze the current revenue models followed by online video sites and find out if there are any bottlenecks. Since the primary revenue for these sites is from advertising, focus would be given to examine how these sites can make their advertising more relevant to viewers and thus attract more advertisers. After analyzing the drawbacks of the models used by these sites, new strategies for online video sites to earn more revenue would also be explored.
Majority of the respondents were between 20 -30 years old, as it is this age group that is predominantly heavy viewers of online video. The sample had equal number of male and female respondents selected from the Mumbai, Delhi, Bangalore and Chennai. Some of them were also from small towns like Bhopal, Cochin, Chandigarh, Lucknow and Hissar. Around 4% of the respondents were currently living abroad in USA.
54% of the respondents spent more than an hour daily watching online video ( 1). Out of these 8% of respondents spent more than 2 hours a day watching videos online.
The amount of time people spend watching online video has been increasing drastically over the past few years. A major contributor to the increase is the proliferation of social networking sites through which users can share their favorite video links with the friends.
Also significant improvements in the internet speed and bandwidth have meant higher quality video can be streamed online and hence there is not a lot of perceivable difference between the quality of television broadcast and online video.
A little more than half of the respondents visited YouTube daily ( 2). Reasons for this could be that YouTube boasts of the largest number of user created clips online and also has a large variety of other content. Also the website allows you to post its links on social networking sites like Facebook which increases the number of visitors to its site.
Metacafe and Yahoo Videos were the next most visited sites, but their reach is very low compared to that of YouTube – 13% and 15% respectively. Metacafe would be popular among the youngsters because it has a feature which allows its users to turn the ‘Family Filter’ off and access adult content.
Not a lot of respondents accessed Hulu because the site does not allow Indian viewers to watch its TV content. A lot of the respondents did not visit Digg and Videosift because these websites were not yet very popular in India.
Among ‘Others’ a large number of people visited Ted.com, a site where people talked about ideas for the future. The videos on this site feature prominent speakers talking for around 18 minutes about technology or ideas that would change the world we live in.
When it comes to content one does not see significant concentration around any one type ( 3). Music Videos are the content most in demand in online video sites, with a quarter of the respondents reporting that they would watch videos of the favorite rock star, band or singer on online vide websites. It may be noted that a lot of users might be using these sites just to listen to their favorite music and not actually watch the videos.
The next most popular content on these sites were the various clips uploaded by users on these sites. This would include humorous clips, how to do videos, videos of important functions, creative clips etc. Most of these videos are shot by an amateur with a digital camera or a camcorder.
There is not much difference in the amount of viewers for movies, TV serials and sports content. While this content is in heavy demand there are a lot of copyright issues involved with them and hence they are not freely available on online video sites. News seemed to be the least popular content among the respondents, but that could be attributed to the fact that majority of the respondents were in the 20-30 age group. Other than the above content, some male respondents also watched porn on online video sites.
Majority of the respondents felt that they were watching lesser television due to online video ( 4). This is in contrast to the findings of the 2009 Nielsen report which states that online video has not affected TV viewership. Reasons for people choosing online video websites over television could be
1. Getting to watch TV serials online on the same day as that they are broadcasted internationally. Usually Indian audiences have to wait a long time before an international television series is broadcasted here.
2. Having greater control on the type of content to watch. This would involve choosing the type of content, time to watch it and pausing as well as rewinding the clip as per convenience
3. Due to increased bandwidth of internet there is not a lot of difference between the quality of the video viewed online and that of television.
Lesser interruption of advertisements in online video once the clip starts playing.
Respondents who still watch the same amount of television are probably followers of a particular show or channel which they still loyally follow on television.
Most of the respondents contacted preferred watching online video late at night ( 5). Almost no one watched videos online in the morning and afternoon. Reasons for this could be
1. People are usually free at that time day after going their office hours or attending classes in college
2. Usually there is lesser internet traffic late at night which results in a higher bandwidth to stream videos. This helps in watching the video online without any interruptions
Most of the internet service providers have schemes for free downloading at late night. Hence watching online videos at this time would not result in a huge dent in the wallet.
A large number of respondents also said that they do not have a fixed time for watching online video. These respondents probably spend a lot of time throughout the day on social networking sites and check out video links posted by their peers.
A large majority of the respondents watched online videos alone ( 6). The comparatively smaller size of the computer screen could be one of the reasons why individuals prefer to do so. This is in contrast to television viewing which people usually watch with friends or family.
Though most of the respondents spent a large amount of time watching online video, a large percentage of them had never uploaded a video online ( 7). This may be because people consider uploading videos to be very complicated or feel that it would take up a lot of their time. Also a lot of people might not be comfortable sharing their personal videos on a public forum such as YouTube. This might be especially true for girls who come from conservative families in India.
Majority of the respondents created and uploaded clips on an online video website for some competition or part as a college assignment ( 8). A large number of respondents also uploaded creative clips which included short films, plays, humorous clips etc. with the intention of sharing their creativity with their friends.
Respondents also uploaded recordings of important events that they attended such as speeches by prominent personalities, sporting events, concerts etc. People also uploaded videos of their trips to various places. Family videos were also uploaded in order to share them with relatives or friends who were abroad.
Most of the respondents felt that they had uploaded videos because they had a desire to express themselves ( 9). This was expected as the proportion of the respondents who uploaded video clips as part of competitions was relatively more in the sample. Also people usually feel that they have a hidden talent or their creativity has been suppressed by their daily meaningless activities. Online video websites give such users an opportunity to explore their true potential and express themselves.
18% of the respondents uploaded clips to get critical acclaim from their peers, which could be in the form of ratings, likes and comments for the videos. People actually derive a sense of satisfaction from higher ratings or a larger number of comments for a video that they have uploaded online. They might even compete with their peers for the same.
Very few respondents (5%) attached significance to remuneration or felt that they uploaded videos to boost their self esteem. Also while helping people they know might be an outcome of their uploading videos it was not the primary motivation because of which people uploaded videos.
Even when all the respondents were asked to rank the various factors due to which people upload videos, ‘desire to express oneself’ and ‘critical acclaim from viewers’ received the highest ranking ( 10 and 11). 42% of the respondent felt that people uploaded videos because of a desire to express themselves whereas 19% felt that they did it for critical acclaim.
Remuneration for uploading popular content was ranked lower by respondents. Most of the respondents were not aware that YouTube paid its popular content creators a share of the advertising revenue. They felt that getting money from YouTube involves complex processes and it would also be a lot of fine print.
A very small number of the respondents felt that people uploaded videos to boost their self esteem or benefit people they knew. Most of the respondents probably felt that the clips were mainly for entertainment purposes.
A large majority of the respondents felt it was very important that the website that they selected for watching online video should be free to watch ( 12 and 13). They have probably got accustomed to getting their content online for free and would only pay for it if it is not available anywhere else. People also felt it was important that the website should contain less intrusive advertisements as they largely hamper the viewing experience on these websites.
Large amount of music videos, movies and TV serial episodes were also important parameters while selecting a website. Surpringly respondents felt that a large amount of user created clips and sports clips was not important parameters for an online video website to have. The female respondents probably did not watch a lot of sports content online and hence did rate it very highly. User created clips are present in large abundance in most online video websites hence viewers might have started to attach lesser significance to them.
For this section respondents were asked to refer to a document that explained the different type of online advertisements to them (See Annexure 2).
As is clear from 14, a large majority of the respondents contacted could not recall any advertisement that they had seen on an online video website. They were aware of the different types of advertisements that were visible on the websites, but could not recall any brand. Among the formats used video ads and banner ads had the highest recall value. These formats were probably more interesting and were able to grab the attention of the viewer to a greater extent than other formats.
Ticker ads and pop up ads seemed to have the lowest recall value as people did not pay any attention to them. The respondents might have got accustomed to ignoring these types of advertisements.
72% of the respondents contacted did not have a favorite online advertisement ( 15). One important reason for this could be the low recall value of these ads, as seen above. Also a lot of people do not find any of these ads engaging enough and hence do not pay attention to them.
15% and 12% of the respondents said that their favorite advertisement was a video and banner advertisement respectively. Most of the advertisements which respondents said were their favorite was specially designed for the online medium e.g. adultdost.com was a very creative campaign done for Tata Sky in which the user is prompted to click on a banner which seems like a link to an adult site. But on clicking the banner they are redirected to a Tata Sky web page which is promoting their interactive devotional program.
Majority of the respondents felt that advertisements on online video websites interrupted their viewing ( 16). People felt so strongly about online advertisements because they were not entertaining enough to pay attention to. Viewers are known to appreciate and enjoy watching creative advertisements. But in the online medium viewers do not find the advertisement compelling enough and hence view them as a source of irritation.
Almost no respondent said that the watch the advertisements on online video websites with interest ( 17). A large majority of people said that they were annoyed when they saw an online video ad and tried to forward it. In case if the advertisement did not fast forward they would let it play, but not pay any attention.
7% of the respondents also said that if the site had a lot of advertisements then they would get agitated and switch to another website which had lesser advertisements.
Respondents were asked to rank the different advertising formats used on online video websites according to their preference ( 18). These ranks were given a fixed weight age and the preference score was calculated using all the ranking given by the respondents.
Text banners were the most preferred advertising format because of their non intrusive nature and their quick loading capability. Placement of the products was the second most preferred format. Pop up and interstitial advertisements received the least preference score because users found them very intrusive.
Videos too received a low score because they were perceived to take a long time to load. From the above rankings we can make out that user prefer those online advertisements that did not interrupt their viewing and did not slow down their viewing experience.
Among the parameters for online video advertisements, respondents rated ‘Entertaining’ as the most important ( 19). If the user does not find the ad to be interesting or engaging they would try to fast forward it or would not pay any attention to it. Also a lot of brands would just reuse their television campaign online which would again bore a lot of the viewers. Marketers should redesign their online campaigns taking into account the dynamic nature of the medium.
A quarter of the respondents rated ‘Being allowed to choose the advertisement’ as an important parameter. If one also considers the scores for important and most important together, this proportion increases to 55% (s 19 and 20). The online video website would give the viewer the option to select the advertisement to watch before viewing the clip. This would result in further engagement by the viewer while watching advertisements and also they selecting something that they would actually like to watch.
Respondents also felt that online advertisements should be non repetitive because they tend to tune out otherwise. ‘Relevance to the content’ parameter was rated less important by the respondents. ‘The Position of the advertisement’ was also perceived to be not very important to the respondents as people wanted to avoid watching advertisements that did not interest them.
When asked their preferred position for an online advertisement ( 21), 91 % of the respondents did not want advertisements to be played once the clip started playing because they felt it would interrupt their viewing experience. Also as advertisements are played from a different server it would also slow down the playing of the clip.
Respondents would prefer it if the advertisement would play before the clip is played or when the clip is paused. Currently YouTube does not show any advertisements when the clip is paused.
Majority of respondents were not ready to pay anything for subscription to YouTube ( 22). They would switch the numerous other video websites if YouTube went the subscription way. In order to increase subscription revenues YouTube would need to provide features and content that are not available on other websites for free.
Around 37% of the respondents said that they are willing to pay less than Rs 100 as a subscription fee to YouTube. The maximum amount that some respondents were willing to pay for YouTube is Rs 200.
23 presents the distribution of respondents who are unwilling to pay for online content across types of content. Largest number of respondents expressed their unwilling to pay for news and user created content. Reasons for this could be that these content are widely available for free and viewers do not attach enough significance to pay for them.
Although music videos are the most popular content among the respondents, half the respondents said that they would not pay anything to view them. Among people ready to pay, majority were willing to spend at the maximum Rs 50 to view music videos ( 24). People attached more significance to movies and TV serials and are more receptive to pay for them. 38% of the respondents said that they are ready to spend between Rs 50 – Rs 100 to watch high quality movies on pay per view ( 25). Around 10% of the respondents were ready to pay an amount greater than Rs 100 for movies ( 26).
42% of the respondents were ready to pay for advanced video editing features that would let them jazz up their videos before uploading it. This would allow users to add various kinds of special effects in the clips. Currently YouTube does not have any such feature.
Despite the fact that YouTube runs advertisements approximately half the respondents said that they are willing to donate money to YouTube to keep it free to use ( 27). Wikipedia was able to raise millions of dollars after its founder made an emotional plea to its users to donate money to keep the site free to use and totally ad free.
Considering the large amount of YouTube users, a similar appeal from the Steve Chen and Chad Hurley would also help the site raise huge amounts of money from its users.
A cross tab analysis was done to further explore the relationships between the data and if further insights can be derived. All the data was coded into SPSS version 15 in order to run the cross tabs.
Chi square test was used to test for statistical significance of the data with a 90 percent level of significance.
As can be seen in 28, respondents who spend less than an hour watching online video are the ones who have given online video advertisements a very low ranking. This could be because they consider these types of advertisements intrusive and would like to directly start watching the clip. These respondents might also have slow internet connections and hence the presence of a video advertisement might result in them waiting for a longer time to view the clip. They would prefer banner advertisements and product placements as it would not slow down their viewing experience.
People who watched online video for more than an hour everyday are the ones who prefer video advertisements. These are the people who belong to the connector segment and usually exhibit engaging behavior by commenting and rating video clips. They wouldn’t mind watching a video ad as long as it is non-repetitive and entertaining. They understand that watching these video advertisements are a small price to pay to watch your clip online for free. Also as they are likely to be more tech savvy and hence have high bandwidth internet connections, the video ads would stream much faster on their systems.
As can be seen in 29, respondents who spend less than an hour daily watching online video are the ones who have given a low ranking for ticker advertisements. One reason for this could be that they feel that it intrudes on their viewing experience by reducing the screen area. Also such ticker advertisements could be very distracting for the viewer and take away their attention from the actual clip. These respondents would prefer other formats of advertisements which would be placed around the viewing area and they not have to pay much attention to.
Respondents who spent more than an hour watching online video, ranked ticker advertisements higher because they could get to watching the clip immediately. Also since the advertisement is integrated with the actual video, it would lead to quicker streaming of the clip.
From 30 we can see that online advertisements on video websites do not have a high recall value and also most of the respondents do not have a favorite advertisement. This could be because viewers do not perceive any of the advertisements they viewed to be interesting enough to grab their attention. It is very essential for the brands that advertise online, to increase their engagement levels with the viewers in order to increase their effectiveness of their advertisements.
Not many respondents said that they had a favorite banner advertisement. Reasons for that could be that viewers have become accustomed to not paying any attention to this kind of advertisement. They see banner advertisements all over any website they visit, but most of the times ignore them. Also the large number of banner advertisements there on any website results in a lot of clutter in the viewer’s minds and hence may be leading to lesser recall for this format.
While video advertisements that are played before or during the clip have a greater chance of grabbing user attention, their recall scores are also very low. Even among users that were able to recall video advertisements, majority of them did not have any favorite video advertisement. Most of the brands just reuse their television commercial in the online medium and hence people do not find anything appealing about them.
Almost no respondent was able to recall any pop up or ticker advertisement. The pop up advertisement was a source of irritation to most viewers and most of them would probably immediately close the window on seeing a pop up. Most of the time people might not even attempt to read the content that is there in the pop up window.
Though the ticker format has the most chance of grabbing viewer attention, not a lot of people get engaged by them. Most respondents usually tend to view it as a source of interruption and pay no heed to them. Some people might also get irritated by the fact that it results in a lesser viewing area for the video clip. Brands will not to come up with more creative formats and entertaining advertisements if they want to increase the recall value and popularity of their online advertisements.
As can be seen in 31, even those respondents who named a video advertisement as their favorite advertisement also did not pay any attention to video advertisements. Most of them tried to fast forward the advertisement in an attempt to directly watch the video clip. If they were not successful then they would let the video clip play but would not pay any attention to it.
The respondents who would get extremely agitated and switch to another website belonged to the category that did not have any favorite advertisement. This section did not have a very positive disposition towards advertisements and would get irritated if they are forced to watch an advertisement. One way to make advertisements more appealing to these people would be to give them a choice between advertisements so that they would able to view the advertisement that would appeal to them the most.
Even though music videos were the most popular content that the respondents viewed on online video sites, not a large number of people were ready to pay for it ( 32). Even people who rated large number of music videos as a very important parameter for selecting video websites were not ready to pay money for viewing them.
Respondents did not attach enough significance to music videos, probably because there are a large number of music channels on television that were playing music 24 hours a day. Also due to copyright issues respondents might have felt that online video sites cannot have all the good music videos in their library.
But YouTube is trying to change this perception by tying up will all the major music labels like EMI to broadcast their music videos on their website. Also music channels on YouTube like Vevo, HollywoodRecords, JoansBrothersMusic, Ultrarecords etc are creating waves and have millions of subscribers.
In order to upload and share specific category of videos, these music channels are created by individuals or communities. They channels also engage viewers by sending them emails of the latest videos added and inviting them to view them. This helps people to know if their favorite singer or rock band has released a new video or what are the new videos that have been released on that particular day.
As can be seen in 33, people who feel that it is important for a video website to have large amount of movies are also willing to pay money to view them. In fact majority of the respondents were willing to pay between Rs 50 – Rs 100 to view a pay per view movie online. People attach higher significance to movie because they are of longer duration than other clips and hence are perceived to have more value for money. But people will only pay for movies that are not easily available everywhere and are of good viewing quality.
This trend can already be seen with the movie 3 Idiots that will be made available for download on YouTube 12 weeks after its release. This would seem especially attractive to the NRI population who do not have easy access to the latest Bollywood movies. Film producers also would stand to gain, as their movies are anyways being illegally downloaded on the internet and by releasing their movies on online video sites they would get additional revenue.
Internationally also YouTube has tied up with major studios like MGM to stream their movies online. They also tied up with independent film makers to prepare movies especially for their video website. They would stand to make a lot of money if any of these movies connects with the audiences. Video websites may also come up with movie channels on the lines of music channels in order to engage the viewers even more.
As can be seen in 34, 45% of all the respondents were ready to pay for TV serial episodes on online video websites. Also, those respondents who were willing to pay money for subscription to YouTube attached a lot of importance to television serials.
75% of the respondents who were ready to subscribe to YouTube said that they were ready to pay to view television serials online. In fact 10% said that they were ready to pay more than Rs 50 in order to do so.
People in India would be willing to pay to see international TV serials on online video websites as there is usually broadcasted in India after 2-3 months delay. Also Indian broadcasters do not have the rights for many international television series for which viewers would see a lot of value to pay to watch online.
Similarly if Indian television shows are available on online video websites then a lot of NRIs would pay money to see them. Shows like ‘Balika Vadu’, ‘MTV Roadies’, ‘Rakhi ka Swayamvar’ etc would find a lot of viewers among the Indian audiences settled abroad.
Another option that could be explored is to create a series like Lost, Prison Break etc for just the online audiences. These shows could be produced by either the major studios or even independent film makers and would be released just online. The chances of this being successful are extremely high because the number of people watching television shows online all over the worlds is increasing.
News is not the most popular of content, among the 20-30 year old viewers who were the majority respondents of this survey. As can be seen in 35, 81% of all the respondents were not willing to pay for news content online. Even among the respondents who were ready to pay money for subscription to YouTube, 79 % were ready to pay any money for news.
News content is widely available across a lot of mediums and hence people do not attach a lot of significance to it. People read newspapers in the morning, look at newspaper websites in office and watch news on television in the evening. As most of the newspaper websites and news channels are available for free, it is highly improbable that people would pay for this kind of content online.
Among all the respondents 70% of the respondents were ready to pay for movies on online video website ( 36). Also, 85% of the respondents who were willing to pay for a subscription to YouTube were also ready to pay for movies. This included a high percentage of viewers who were ready to pay Rs 100 – Rs 200 for subscription and were also ready to pay Rs 50 – Rs 100 for pay per view movies. From this we can conclude that respondents who are ready to spend money on YouTube attach a lot of significance to movies.
Movies seem to be the easiest to monetize among all the different types of contents available on online video websites. The different ways in which this could be done are subscription, streaming on demand or allowing users to download the movies. The model eventually implemented would largely depend on the agreement with the movie studios and how their copyright concerns are addressed. YouTube recently implemented the streaming on demand model for the five films whose rights it acquired from the Sundance film festival. The films could be streamed for $3.99 and the user could view it for a time period of 48 hours.
As can be seen in 37, only 48% of the total number of respondents felt that user created clips is important for a video website. But among the respondents who were willing to donate more than Rs 100 to YouTube, 75% felt it is important for an online video website to have large number of user created clips. Out of these respondents 4% were willing to donate more than Rs 500 to YouTube.
If YouTube ever started looking at donations as a serious source of revenue then it would have to focus on user created clips. People who are willing to donate money to YouTube also attach a lot of significance to music videos. But it is user created clips that are the USP of the online video websites as they are not available on any other medium. Also it is user clips that were initially responsible for YouTube gaining popularity among its viewers.
Other than sharing advertising revenue, YouTube will have to come up with more incentives for people to upload high quality user generated content which would result in higher number of visitors for the website. An increase in the number of visitors should result in higher donations, if the website ever chose to take that route in the future.
As can be seen in 38, only 35% of the total respondents felt that sports clips were important criteria for selecting online video websites. This number would even further drop if one considered only female respondents. Among those respondents who were ready to donate more than Rs 100 to online video websites, only 13% felt that sports clips were essential for a video website.
But this survey was conducted before the news came out that the IPL was going to be broadcast on YouTube. People might attach a lot more significance to sports clips if premium sporting events like the football and cricket world was broadcast live or even with a small delay on online video sites. Also websites like cricinfo are immensely popular for checking live cricket scores online. If YouTube started broadcasting the significant moments of the match like the fall of a wicket, boundaries etc during the match then it is bound to increase its number of visitors.
Online advertisements do not seem to be connecting with the viewers. 56% of the respondents could not recall any online advertisement and 72% did not have any favorite online advertisement. The huge unpopularity of this type of advertisement is also re-emphasized by the fact that around 70% of the respondents felt that they interrupted their online viewing experience and around 90% saying that they do not pay any attention to them.
45% of the respondents felt that it is very important for online advertisements to be entertaining. Just re-using the same television commercial in the online medium is not going to catch the attention of these users. Also 58% of respondents felt that is important for advertisements to be non repetitive. Bombarding online video viewers with the same advertisement will only result in viewers trying to find ways to avoid the advertisement.
55% of the respondents replied they would pay more attention to advertisements if they were allowed to choose them. Due to this they would watch advertisements that actually appeal to them and this would also help avoid advertisements becoming repetitive.
The position of the advertisement was not rated to be a very important factor for the respondents, but only 6% said that they would like the advertisements to be played during the clip. They felt it would intrude on their watching the clip.
Out of all the advertising formats online video advertisements was ranked 5th among the viewer preferences. This despite the fact that 26% of the respondents were able to recall an online video advertisement and 15% had a favorite online video advertisement. This is higher than the other advertising formats. On running a cross tab analysis it was found out that 25% of the respondents who had stated a low preference for online video advertisements, spent less than an hour a day watching online video.
Respondents who belonged to the connector segment had actually given online video advertisements a higher preference score. What might be working against this format of advertising is the perception that these advertisements slow down the viewing experience and also the fact that viewers have to spend some time watching the advertisement before watching their requested clip.
The Banner advertisements were ranked in the top 3 of the respondent preferences. But this format too suffered from low recall value. What respondents probably liked about this format was that it does not intrude on their viewing and are quick to load.
But almost every website tends to over utilize this advertisement format which results in viewers tuning out and ignoring banner advertisements.
Ticker advertisements were ranked 4th according to the respondents preferences. Again people who spent less than an hour daily on online video websites were the one who ranked this format lower. They probably felt that this format of advertising was intrusive as it ate up their viewing area.
People who belonged to the connector segment actually ranked this format higher with 60% giving it a top 2 rank because they could start watching the clip without any delay.
Even though product placements received the second highest preference score among all the advertising formats, they had very low recall scores. This may be due to the fact these advertisements are supposed to work at a very subliminal level. Viewers might prefer product placements because they find them to be the least intruding of all the formats.
But respondents who belong to the connector segment have not ranked this format very highly. They might feel that if a product placement is not done very subtly, then it would distract them so much that they will lose interest in watching the clip.
Pop up advertisement and Interstitial advertisements were the least popular of all advertising formats. They received the lowest preference scores, recall values and no respondent named any one of them as their favorite advertisement.
They are perceived to do very little to engage the viewer and are seen a source of irritation. In fact the first impulse viewers have on seeing a pop up advertisement is the close the window as quickly as possible without even reading what is there on it.
Around 55% respondents were willing to pay some amount to subscribe to YouTube. This shows that the popularity of the site is increasing in India very rapidly. While the basic features of the website should be kept free some advanced features can made available to viewers who subscribe. These features would include reduced advertisements and advanced video editing features for which 42% of the respondents said they willing to spend money on.
Among the different type of content, movies seemed to be the easiest to monetize with 47% of the total respondents willing to pay more than Rs 50 for pay per view movies. Also among respondents who were willing to subscribe to YouTube, 85% attached a lot of importance to movies. The problem with monetizing movies is that these websites need to enter into an agreement with all the major movie studios to ensure there is no copyright infringement. The options other than subscription are to offer streaming on demand or allow users to pay for movie downloads.
Music Videos which were the most popular content among all the respondents also have a lot of potential to be monetized. 78% of the respondents said that it was very important for online video websites to have a large number of music videos. But people did not see a lot of value in paying for single music videos with 51% of all the respondents saying that they would not pay anything for it. But music channels on online video websites which have a large subscriber base is something which users will see a lot more value to pay for.
There is also some potential to monetize TV serials with 45% of all the respondents saying that they are willing to pay money to see them. In fact 17% of all the respondents said that they were ready to pay more than Rs 50 to see them online. These respondents also included Indians currently living abroad who would pay this money to see Indian shows online.
News and sports content seemed to be the most difficult to monetize with not a large number of respondents willing to pay for them. The problem in monetizing news is that it is widely available for free through other mediums. While sports content is popular among the men, females tend to attach lesser importance to it. The number of respondents willing to pay for sports content might increase if premium sporting events like the IPL, World Cups etc is broadcast live online.
More than 50% of the respondents said that they were ready to donate money to YouTube. People who were willing to donate money attached to lot of importance to user created content; with 75% of them saying that it is important for a video website to have a large number of user created clips. Thus YouTube and other video sites will have to come up with ways to motivate viewers to upload more content, if they want to start asking their viewers for donation.
Respondents who were willing to donate also felt that it was important for an online video site to have a large number of music videos. But the problem with this is this is that agreements will have to be worked out with music labels to share the donation money.
Even though the popularity of online video websites may be increasing rapidly, not many people pay attention to the advertisements on the website. So in order to encourage marketers to spend more on advertising on these websites steps need to be taken to increase the effectiveness of online advertisements. The advertisements need to engage the viewers more so that they pay greater attention to them. This can be done in the following ways
* Allowing viewers to choose the advertisements they want to watch. This can be done for the video advertisements that play before the clip and will lead to people paying more attention to the advertisements.
* Creating more entertaining advertisements that would engage the viewers. This could be done by using animation or other eye catching as well as cost effective techniques that the web has to offer. Users are also more likely to pay attention to a commercial that they haven’t seen on television before.
* The advertisements need to be non repetitive so that people don’t get into the habit of tuning them out.
* Users do not pay a lot of attention to the banner advertisements that surround the viewing area. But banners can also be placed on the viewing widget on the website while the clip loads. Also when views pauses the video clip a banner advertisement can be displayed on the viewing area. Since these advertisements have a higher chance of getting the users attention a premium could be charged for them.
* Using minimal amount of pop up advertisements as users find them to be very irritating and most of times close the window immediately.
* Ensuring that video advertisements will not take a long time to load and hence not slow down the online viewing experience.
While the basic content of YouTube like user clips should be kept free for all the subscribers, the site could charge its subscribers for some features such as advanced video editing. These sites could also earn more money by charging film producers for airing trailers of their upcoming films.
A lot of viewers would be willing to pay to view movies online, provided that they are of high quality. Hence it makes sense for YouTube to tie up with the big studios in Hollywood and film producers in Bollywood for content. YouTube should also try to tie up with independent film makers for content specifically made for the online medium.
Also, as music videos are the most popular content on video websites, additional revenue can also be earned by charging for music channels. Viewers might see more value in paying for these channels rather than paying for a single music video. Also people might be willing to pay to see the live broadcast of premier sporting events like IPL on YouTube.
A lot of viewers would be willing to donate money to YouTube, if the website ever decided to take that route. In fact a large number of users, who were not willing to subscribe to YouTube, were ready to pay money in the form of donations.
The sample for the research mainly comprised of respondents who age was between 20-30 years. In order to get a more complete picture people from other age groups must be included
The sample size taken for this study is not very large due to logistical reasons
Most of the respondents were from the cities in India. Since online video websites are popular all over the world, respondents from other countries should also be interviewed
The study has touched upon some recommendations for online video websites to increase their revenue. In order to validate the feasibility of these steps, more in-depth research is required
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Future trends in online video advertising
Online video engagement
Online video fans watching less television
Online Video Industry Index
Online revenue models
YouTube paying popular content creators
YouTube’s profitability s
YouTube steps up advertising deals
1. What online video websites do you visit?
2. What do you watch on online video websites?
a. User created clips
b. Music Videos
d. TV Serial episodes
f. Sports clips
g. Any other please specify
3. In a day, how many hours do you spend watching online video?
a. Less than an hour
b. 1 -2 hours
c. 2-3 hours
d. Greater than 3 hours
4. How has watching online videos affected the time you spend on other audio-visual entertainment mediums like TV and films?
a. Spend lesser time watching TV
a. Spend lesser time watching films
b. Spend more time watching TV
b. Spend more time watching films
c. The time I spend watching television has not changed
c. The time I spend watching films has not changed
5. When do you usually watch online video?
d. Late night
e. No fixed time for watching online video
6. Which one of the following statements describes your online video watching behaviour?
a. I watch the videos alone
b. I watch the videos with 1-2 friends
c. I watch the videos with a large circle of friends
d. I watch the videos with my family
7. Have you ever created online content by uploading videos?
8. If yes in Qn.7, describe the nature and type of the content
9. If yes in Qn.7, what motivated you to do this?
a. “Altruism” – In order to benefit of people you know
b. Boost self esteem
c. Desire to express one self
d. Remuneration for content creation (shared advertising revenue)
e. Critical acclaim from viewers
f. Can’t Say
g. Any other reasons please specify
10. What in your opinion can motivate creators of popular videos to upload more videos on a website like YouTube? Rank them in order (Ranking in ascending order, i.e., the highest ranking option gets 1)_
a. “Altruism” – For the benefit of people you know
b. Boost self esteem
c. Desire to express one self
d. Remuneration for content creation (shared advertising revenue)
e. Critical acclaim from viewers
11. Rate the following parameters, in terms of their importance when selecting an online video site, on a scale of 1 to 5
Should have large amount of user created clips
Should have large amount of music videos
Should have large amount of sports content
Should have large amount of TV serials episodes
Should have large amount of movies
Should have less advertisements
Should be free to watch
12. What is the last advertisement you recall seeing on an online video website?
13. Which is your favourite advertisement that you viewed on an online video website?
14. Do you think that advertisements on online video websites interrupt your viewing?
c. Can’t say
15. How do you react when you see a video advertisement on an online video site?
a. Watch it attentively
b. Let it play but do not pay any attention
c. Try to fast forward the advertisement so that you can skip directly to the clip
d. Get annoyed and switch to another website
16. Rank the following advertising formats on online video websites according to your preference in the ascending order (1 being the most preferred format and so on)
Video advertisements that play before, after or during the clip
Video Banner advertisements
Text Banner advertisements
Pop up advertisements
Advertisements that play concurrently with the video in stream e.g. overlays and text ads that play at the bottom of the video screen
Product placements in the video
Interstitial advertisements i.e. ads that appear between web pages a user requests
17. For a video advertisement on an online video website, rate the following on a scale of 1 to 5 in terms of their importance (1 being the least important and 5 being the most important)
Relevance of the advertisement to the content of the clip
Being allowed to choose the advertisement
Should not be repetitive
Should be entertaining
The position of the ad i.e. before, after or alongside the video clip
18. Given a choice, when do you prefer an online video advertisement to be played?
a. Before the video clip
b. After the video clip
c. During the video clip
d. When the video clip is paused
19. Have you paid for online videos before? If yes, specify the site and amount.
20. Have you paid for any other online content? If yes, specify the type of content, site and amount
21. If YouTube became a subscription site, how much are you willing to pay for the subscription monthly?
a. Not willing to pay for you tube
b. Less than 100 rupees
c. 100 – 200 rupees
d. 200-300 rupees
e. Greater than 300 rupees
22. How much are you willing to pay for viewing the following content on an online video website?
Type of content
Not willing to pay
User created clips
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
TV Serial episodes
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
Videos that are totally free of advertisements
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
Advanced video editing and other features
Less than Rs 50
Rs 50 to Rs 100
Rs 100 to Rs 150
Greater than Rs 150
23. If YouTube asked for donations like Wikipedia, what is the maximum amount you are willing to donate?
a. Not willing to donate to YouTube
b. Less than Rs 100
c. 100 – 500 rupees
d. Greater than 500 rupees
1. Video Banner advertisements
A banner is a typically rectangular advertisement which when clicked takes you the webpage of the advertiser and is usually placed below, on the sides or above the content of the web page. A video banner would have a video clip or animation playing inside the banner.
2. Text Banner advertisements
Text Banners usually have plain text in the banner that is informing the viewer about some features of the brand.
3. Video advertisements that play before, after and during the clip
4. Pop up advertisements – A new website window is opened to display advertisements
5. Ticker advertisements – Advertisements that play concurrently with the video in stream e.g. overlays and text ads that play at the bottom of the video screen
6. Product placements in the video i.e. placing goods and services in the context of the online video
7. Interstitial advertisements i.e. ads that appear between web pages a user requests. These are web page advertisements that are displayed before or after an expected content page, often to display advertisements
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