Lessons Learned from YouTube's $300M Hole - Hank's Tumblr

THiS WALL OF TEXT IS ABOUT BUSINESS AND ONLINE VIDEO IF YOU DON’T CARE ABOUT THAT STUFF KEEP SCROLLING I WILL POST MORE CAT GIFS SOON

For those of you who don’t know, John and I were recipients of part of YouTube’s “Original Channel” funding initiative. We used that money to start Crash Course and SciShow. We were extremely excited to get the chance to have some real capital to spend on content, and the result has been great…we are extremely grateful to be a part of this program.

It was a great thing for us…but it might have been a bit of a dopey idea.

There were a lot of recipients of this money, and many of them were major media companies trying their hand at online video that received some fat checks, up to $5M a piece, to launch TV-like channels. What we all found out is that, no matter how hard you push them and how much money you spend on them, YouTube doesn’t work like TV…and funding it that way is daft.

Of the 114 channels that YouTube funded as part of this initiative, my educated guess is that exactly one earned back its advance…SourceFed, the four-times-daily news show from Phil DeFranco’s studio. Hardly traditional media…SourceFed is gritty, low-budget, written by its hosts, and edited by a tiny team.

Most of the channels that did well had comparatively small budgets and were run by people who had made online video before. Some great content got made, some of my favorite channels wouldn’t exist without the initiative. SciShow and CrashCourse are not doing terribly, at this rate, we’ll earn out our advance in about three years.

To be clear though, the vast majority of these channels will never earn out their advances. 

But some lessons were learned (or are being learned) by this initiative, and they are valuable. I don’t know if they’re worth $300M, but as a recipient of a small fraction of that, I really have no place to complain.

Here are some of those lessons:

Spending more money to produce the same number of minutes of content does not increase viewership. Online video isn’t about how good it looks, it’s about how good it is. People who make online video are much better at making online video than people who make TV shows. This probably seems obvious to you (it certainly is to me) but it apparently was not obvious to the people originally distributing this money. When advertising agencies tell you they want something (higher quality content, long-form content, specific demographics, lean-back content, stuff that looks like tv) it’s not our job to attempt to deliver those things. In a world where the user really does get to choose, the content created to satisfy the needs and wants of viewers (not advertisers) will always reign supreme (thankfully.)

YouTube is now experimenting with much smaller grants (a tenth to a fifth of the size of the original grants) awarded largely to people who have experience making online video (the new MentalFloss channel is funded by one of these grants.) This indicates that they’ve learned the first two lessons. 

With regards to the last lesson, allow me to submit to any YouTube employees out there that the ad agency doesn’t have the power in this equation. YouTube is a young company, it does not need to convert 100% of its value to dollars. Please, let the advertisers figure out for themselves how to tackle this very new medium instead of trying to shape the medium to meet their needs.

Seems to me, that’s the strategy that got Google where it is today.