Rich Media on the Web: Crossing the Chasm

This MMS102 team assignment surely couldn’t have come at a more interesting time (as if the international goings-on in the financial and economic spheres are not enough befuddlement already). For “YouTube the business”, is in a state of flux.

Having been officially acquired by Google for US$1.65 billion in Oct. 2006, it’s plain business sense that Google look after its ROI, on an investment that has yet to prove its price tag. YouTube (YT for purposes of this discussion) today is in frenzied wheeling-and-dealing to sign up the bigger providers of full-length feature, Hollywood-type films, so that they can make their blockbuster movies available for everyone’s viewing pleasure (internet video-on-demand), relying on recently announced creative schemes for advertising revenue for sustainability.

But the “GooTube” business model in its current form has been the result of much upturning and many a brainstorming, so that sieving it through Geoffrey Moore’s technology adoption chasm is not a cut-and-dried task. Our team reached the consensus, that to be true to YT’s continuing evolution, we shall have to run the chasm analysis across three distinct groups that make up the bulk of the YT community namely, the professional content providers, user-generated video contributors and the wider YT community of viewers.

Any discussion about the process of technology adoption for YT shall necessarily be dominated by the story of the phenomenal growth in viewership numbers, so that YT’s audience can be considered as the single, most impactful development in the checkered history of the company. Google has put a premium on this popularity when it paid YT’s billion dollar price tag.

The story of technology adoption by contributors of user-generated content closely parallels that of the general viewing public. After all, they were a tandem when YT first introduced the video sharing platform to the world in 2005. It seemed for a good while that that was what YT was all about, until the advent of professional content.

Professional content on YT is a different animal altogether. It comes at the heels of a successful new paradigm in social interaction and video delivery. It then wants to extend the paradigm to include a new advertising revenue model, piggy-backed on mainstream Hollywood-type content. Relatively new and unproven, it consequently takes a distinct, separate course in YT’s technology adoption cycle.

Professional Content Providers

The Professional Content Providers (PCP for purposes of this discussion) segment includes the creators and distributors of full length feature films and television shows, who were for some time, the ones who cried foul at the conflagration of copyrighted content on YT. It includes the likes of MGM (Legally Blonde, Bulletproof Monk, Magnificent Seven, etc.), Lions Gate (American Psycho, Rambo, Saw, etc.), BBC (Doctor Who, Life on Mars, etc.) and a bunch of more than a hundred medium-sized companies who had been partners long before this well-contemplated shift to full-length video.

These and other recent entrants into the YouTube community are lured by the sheer size of potential viewership and correspondingly a possibly lucrative revenue stream in partnering with YT. This segment of the YT community is currently poised for growth, as YT now places its bets on long format professional content as the cash cow that shall bring YT to profitability in the mold of Google.

Since the “GooTube” strategy is to bring in the majority of PCPs to its platform and establish itself as the de-facto hub for on-demand video, then judging by the profile of recent partner sign-ups, and by how much of the big movie and television distribution outfits remain beyond its clutches, we can say that YT adoption levels by PCPs is at the tail end of the early adoption stage and carefully gearing up to cross the chasm. Companies in this category are typically receptive of market trends and are quick to respond to shifting business realities, so that we see the transition from early adopters to early majority (or what equates to Moore’s metaphor of a bowling alley in the sequel “Inside the Tornado”) as not being as slow as that which transpired for YT’s viewing public. Whether or not YT can cross its PCP chasm is extremely critical to the company’s success, in fact it can very well be a make-or-break scenario.

YT has been unequivocal about its intention to make decent money, that is commensurate to its presence, and one of its biggest bets is in hosting these long-format videos. So that there is no question about its focus, as it moves heaven and earth to get there. Already, it is encouraged that more and more of its “former enemies” are warming up to the idea of revenue-sharing. It is determined to bring on board the bigger PCPs, an idea along the lines of Moore’s beachhead strategy. YT presents itself as the “total” enablement for video-based advertising and this preps it for eventual transition to Moore’s “bowling alley”.

User-Generated Content Contributors

User-generated content (UGC for purposes of this discussion) contributors include the multitude of users-turned-broadcasters who post video blogs, home videos, events/anecdotal clips and in not few instances, undeniable copyright rip-offs. Such postings have spawned mini-celebrities in the persons of Fred, Smosh, MileyMandy, as well as Asian-Americans nigahiga, kevjumba, HappySlip and davidchoimusic. This group also includes all singularly successful productions which have created tremendous buzz and traffic such as Evolution of Dance, Guitar, Numa Numa guy and in a few cases brought instant international stardom to their subjects, the likes of Arnel Pineda and Charice or in the case of Reynaldo Lapuz, a well-deserved notoriety (though mileage just the same).

While mostly amateurish, a good number of these videos by aspiring media artists, were in fact engaging or at least, interesting. There was always the promise of something new and entertaining, or even sensational. The variety of material that were posted ranged from the sophisticated to the mundane. And videos of one’s personal life served as a great come-on for eavesdroppers, who previously never had such access, in such scale and scope, traversing cultures and generations. By word-of-mouth referencing, the number of viewers grew. Industry analysts pointed out that it was this notion of free-spirited auto-broadcasting and sharing on any subject imaginable, very often not available in mainstream media, that brought much popularity to the site.

At the start of 2006, contributing members posted an average of 8,000 videos daily. In another four months, they were doing 35,000 daily. Since then the growth had been viral, with users alerting their friends and family to particular favorite videos. These in turn learned of the site and then decided to share their own videos, and the process just kept on getting replicated. Today, YT receives more than thirteen hours of video per minute and counting.

Well, 82 million users (numbers vary widely, one put the number at 280 million) definitely does not qualify as “early adopters.” It cannot be said to be at the “late majority” stage either because at this stage, the market should be characterized by a decreasing rate in new sales take-up, it is generally slower than all stages, except for the “laggard” stage and adopters are coming in because of economic necessity or social pressure. All of which do not obtain at the moment.

It can be safely surmised that technology adoption of YT, for UGC contributors is already in the completion phases of the “early majority” stage, as it is generally accepted that YT has already hit mainstream consumption in the U.S. and is the hands-down dominant player in web video, with  Alexa ranking YouTube as the third most visited website on the Internet, behind Yahoo! and Google. An industry observer even volunteers that the U.S. may be looking at the late majority phase by end of 2008.

Viewing public

The General YouTube viewing public, that includes you and me, are those viewers who, in most cases, do not venture as far as creating an account with the site (roughly 54% of the audience according to Quantcast) but are quite content with simply pulling up their desired video fare via the search bar and just getting right on with the viewing.  It’s a quick, no-frills and hassle-free way to get one’s video fix. If one does opt to sign up, it only takes barely 2 minutes. This segment therefore also includes those who sign up but have not tried uploading video.

Logically the largest group, these are the very people who ultimately define what YouTube should be all about. Their tastes and preferences shall dictate the kind of movies that PCPs should be bringing online and the kind of UGC that are uploaded so that they may become revenue-generating for their creators.

To illustrate YT’s tremendous drawing power, here are some stats. In September 2007, Americans viewed more than 9 billion videos online with Google (Google video) & YT ranked first, accounting for 28.3 percent which equated to 2.6 billion videos viewed. Fox Interactive came in a far second at 4.2 percent equivalent to 387 million videos viewed while Yahoo! Sites came in third at 4.1% or 381 million videos viewed.

In January 2008, according to internet information provider, Comscore, Google (Google Video) & YouTube, together garnered 34.3% of all online videos watched, with YT accounting for 96% of the total This percentage translated to 3.3 billion videos.

In July of 2008, 75% of the total U.S. internet audience watched online videos. About 91 million viewers watched 5 billion videos on YT, in this period. It must be noted that there is raging controversy in the subject of measuring the market of online video so that there is wide disparity in metrics.

Still and all, the numbers point to a well-entrenched and insurmountable YT. Based on this, we know that technology adoption by the YT viewing public has long crossed the chasm, has already traversed the bowling alley, with YT successfully penetrating its niche market equivalent, the moms and pops and grandmas and granddads, the conservative and risk-averse segment that want proven services before they give it a try. In Geoffrey Moore’s metaphor, this market segment is already well inside the “tornado”, a period of hypergrowth when we can expect pragmatic users to gravitate en masse. Long accustomed to UGC fare and perhaps patronizing it more than they would copyright-infringing content, YT’s viewing public is in synch with UGC providers in terms of adoption.

Conclusion

As we pointed out earlier in this discussion, analyzing for Geoffrey Moore’s technology adoption cycle and the chasm, is not cut and dried, and cannot be assumed to be homogeneous for the entire YT community. Digging deeper into the analysis, we realized that adopters in the PCP group are exposed to some level of risk as compared to the YT general audience and its UGC, in that their bigger-budgeted productions may not rake in the expected level of revenue (although the argument can be made that they might be fielding re-runs or less popular content as a way to test the viability of the new model). They will always have to make a decision as to where they want to deploy their creations, whether via mainstream media or via YT. To the average viewer, not knowing what material to expect from which medium might be a source of confusion. Put another way, if viewer can expect to see the same movie on YT at a later time, the impetus to watch it at the cinema is lessened.

Also, the concepts of “beachhead strategy” and “mainstream pragmatic buyers” are more useful to an analysis of the PCP than they are for the UGC and general viewers group. For example, it was difficult to actually ascertain whether the bulk of UGC sign-ups were of the “pragmatist” (early majority) or the “conservative” (late majority) type. Even an analysis based on sheer numbers would be hard put at setting a numerical threshold for “early majority”. How many millions of users would constitute the “early majority” may not be a valid question to ask (although some marketing experts have put forward this breakdown: (1) Innovators (the first 2 to 5 percent); (2) Early adopters (the next 10 to 15 percent); (3) Early majority (the next 35 percent); (4) Late majority (the next 35 percent); (5) Laggards (the final 5 to 10 percent)).

For now it appears that these three segments feed off each other, thereby assuring YT’s staying power as the site you would go to, for any video, on anything at all. Movies on demand, are a powerful magnet for more viewership and these professional content providers will continue to be lured into partnering with this most popular video-sharing platform. Amateur videos sustain the fun part of visiting YT and will continue to capitalize on the platform’s “broadcast yourself” openness, to reach out to their desired subscriber base. As the site’s major attraction, these user-generated videos will likely be encouraged and supported by YT even as it grazes into Hollywood.

As in Moore’s discussion of the high-tech market as one where members reference each other when making a decision, YT’s viewing public will be a community that keeps referencing each other on what’s new in internet pop culture and whatnot. There shall be no letup in exponential growth.

While YouTube has reached “early majority” status with user-generated content providers as well as with its general viewing public, it is clearly gearing up for its next major battle, that of crossing the chasm on its new tack, putting up professional, long form content so that this time, it can make some real money with its magical, targeted, in-video advertising. It is YouTube’s coming of age that it decided that it can no longer remain just the king of user-generated video and make paltry profit. It has to bring in professional content that can be monetized, to make sense as a business.

Now, if only YouTube could add a bit more of MySpace to it…

Other sources:

http://www.reelseo.com/comparison-video-viewer-stats/

http://nowisgone.com/2008/01/07/social-media-consumption-hits-early-majority-phase/

http://www.readwriteweb.com/archives/youtubes_could_be_the_best_new.php

http://bub.blicio.us/chad-hurley-on-the-beginning-rise-acquisition-and-future-of-youtube/

http://www.fool.com/research/2000/foolsden000825.htm

http://www.readwriteweb.com/archives/top_10_youtube_videos_of_all_time.php

http://newteevee.com/2008/06/27/chad-hurley-how-we-did-it/

http://www.webtvwire.com/should-google-kill-youtube-was-the-165-billion-buyout-a-total-waste-of-money/

http://venturebeat.com/2008/03/14/comscore-youtube-dominance-grows/

http://www.redherring.com/blogs/25439

http://money.cnn.com/2008/11/06/technology/youtubemgm.fortune/index.htm

http://web2.socialcomputingmagazine.com/user_generated_content_and_youtube.htm

http://news.cnet.com/a-coming-of-age-for-youtube/