Introduction to Rough Stone
On the surface, YouTube is a content platform, but behind the huge traffic is the technical capabilities, advertising system, and hardware and resources behind Google and YouTube. The most important are the huge scale advantages brought by the global business, and the profitability of gradually reduced marginal costs.
Since YouTube was acquired by Google in 2006, many Chinese companies want to make the Chinese version of YouTube. At that time, video platforms such as Tudou and Youku began to explore YouTube models for ten years. Until 2016, they abandoned UGC and turned to Netflix.
In 2016, Weibo took over and proposed to change from China ’s Twitter to China ’s version of YouTube, and began a short video test; the audio platform Lizhi also said that he is the audio version of Chinese YouTube; the B station is also the Chinese version of YouTube Story; Recently, iQiyi has started to enter the Chinese video again, keeping up with YouTube … Although the domestic audio and video industry has never stopped trying the YouTube model, it has basically failed.
YouTube is the world’s largest video website, and its traffic ranks third globally, second only to Facebook and Google. The number of registered users of YouTube every month is basically stable at more than 1.8 billion. In the 2019 global video streaming user watch time list, YouTube is even more powerful than Tencent News, Tencent Video, iQiyi and so on, ranking first in the list. In a separate comparison of the top five video sites, YouTube accounted for 70% of the total time of the top five applications.
Recently, Google showed YouTube’s financial report data to the public for the first time. In fiscal 2019, YouTube ’s advertising revenue alone amounted to US $ 15.15 billion (excluding non-advertising revenue such as subscription revenue), an increase of 35.8% from last year and an increase of more than 85% from 2017. Its revenue accounts for 9% of Google’s parent Alphabet’s total annual revenue, and it will account for more than 20% of all US television advertising expenditures in 2019 of $ 70 billion. As an unquestionable super platform, YouTube is becoming an important growth engine for Google in the future.
1. Entrepreneurship story of “13 billion profit in 20 months”
On February 1, 2004, Jenny Jackson staged the “Milk Leakage Event” in the Super Bowl, and video clips spread wildly on the Internet. But many people cannot see this video when they call, email or surf the Internet. Others encountered such a surprising thing as a tsunami, but could not share the video. The desire for video sharing and the frustration of not being able to easily access the video also plagued three young people at PayPal.
Javed Karim wanted to watch a video of an unattended party, and Chen Shijun and Chad Hurley tried to email him. However, due to the large size of the file, the mail was always returned, and trying to deliver video online also encountered difficulties. So the two began to study together in Heli’s garage, determined to design a simpler solution. In this way, in February 2005, YouTube was born, and the free translation is “your TV” (Americans call the TV Tube).
YouTube arises in a very rare opportunity. Broadband began to spread in early 2005, Flash technology had a 75% market share in this year, and video technology and facilities began to spread. YouTube is like a breeze. After all, video content has more vitality and mobility than text.
Hurley served as the CEO of YouTube. He used to be the chief designer of PayPal, so he was comfortable with web design. Chen Shijun is responsible for YouTube’s technology development. YouTube ’s first video was uploaded by Karim on April 23, 2005, and was only 19 seconds long. In the film, Karim stood in front of the elephant at the San Diego Zoo in California and said, “These guys have good long and long noses, so cool.”
The three founders used to work at Paypal, and they all believed in the user-first product experience. Paypal makes online payment simple and feasible, and YouTube makes video sharing easy. In May, YouTube abandoned the direction of dating and dating and switched to content-based dating.
In June, YouTube redesigned its website publishing strategy: create a video sharing platform; increase the content that users see through related video recommendations; encourage users to communicate and add video comment functions; provide video reposting codes and one-click sharing
Through technical breakthroughs, YouTube supports the upload and playback of various types of video files. Users can freely share various types of their own websites on it, and the videos can be seamlessly linked to any web page. Some people think that YouTube’s “open citations” are suicide because users don’t need to log in to the platform to watch its content. But YouTube doesn’t think so. They think that allowing customers to transfer videos everywhere is a sign of respect for users’ needs. What’s more, this is a good free advertisement, and even has the effect of virus transmission. In addition, YouTube did not have an interactive social chain at the time, so only by fully opening up can we borrow the power of other social platforms.
YouTube has also designed an embeddable player that lowers the threshold for users to watch videos. Many platforms use YouTube as their own video hosting service, bringing huge traffic to the platform. In 2005, the social networking site MySpace was very popular. Many users placed YouTube content on the pages. MySpace realized the threat and banned this behavior, causing a lot of opposition from users.
The UGC route and viral spread have brought explosive growth to YouTube. Social service functions such as tagging, sharing, commenting, subscribing, and grouping of videos on the YouTube website form a video SNS (Social Network Service) system that connects people together through video content. Since then, the attributes of YouTube social media have become clearer.
In August 2005, YouTube ’s first full-time employee, the brother of one of the founders, Heli, pulled in a first round of angel investment of $ 3.5 million. This year, they will be holding out a lot of cash advertisers, and will focus all their energies on technical stability and page design to improve the user experience. In the past, people sharing videos that caused the target website to go down have never happened again. Under the UGC strategy of “sharing” instead of “publishing” videos, YouTube has grown rapidly, and it has become a free memory repository and place for publishing works.
Data from May 2006 showed that YouTube has the largest market share (42.9%) of AOL video sites, almost double the second MySpace video share (24.2%), and more than the sum of the four major portal video shares ( The total of Yahoo! + Microsoft MSN + Google + AOL is 29.6%).
But with user uploads, copyright issues surfaced. The huge challenge to traditional media makes YouTube’s survival environment very difficult, and copyright complaints keep coming. In addition, with the continuous expansion of the number of YouTube users, high broadband expenditures have created huge financial pressure. The second injection of US $ 8 million in April was not enough. Moreover, due to user-made content, advertisers believe that there is no value to put, the company’s cash flow is almost broken. Survival became YouTube’s primary choice at the time.
At that time, Softbank, Yahoo, and News Corp. had discussed the acquisition with YouTube. Finally, in October 2006, Google acquired YouTube in a thunderous manner for 1.65 billion US dollars (about 13.2 billion yuan). This is the largest acquisition since Google was founded eight years ago, when YouTube had only 30 employees. In just 20 months, the three boys created a business legend of $ 1.65 billion. And YouTube and Google embarked on a new journey.
2. Find the right person and start the second half
Google’s acquisition of YouTube is a very exciting story. Since the news of Google’s upcoming acquisition of YouTube, Google’s stock price has risen 2% that day, and after the transaction, the rise for two consecutive trading days has increased Google’s market value by nearly $ 4 billion. That’s more than double the price Google bought YouTube. Some people say that Google bought Wall Street money for YouTube.
For the largest search innovation company and the largest video platform, the combination of the two is indeed a perfect match.
The secret of Google ’s success is that it has its own set of methods to engage users; Google provides content that not only satisfies users ’curiosity, but also keeps them coming. This secret of success has been changing and will never be made public. But these secrets, as well as the huge traffic tilt, will inevitably be provided to YouTube for free. Entering the Google system, YouTube also eased the urgent need for funds.
In addition to funding issues, YouTube’s most difficult problem is a large number of copyright lawsuits. With Google’s support, YouTube has reached content licensing protection agreements with Universal Music, Warner Music, and CBS, alleviating the copyright crisis. In terms of technology, relying on “Google Brain”, YouTube has a powerful platform analysis, search, personalized recommendation capabilities; in terms of drainage, relying on Google’s powerful search recommendations, Google’s family bucket pre-installed products and other drainage methods, YouTube has achieved high speed increase.
As there was no way to completely control user content uploads, YouTube’s infringement and pornography problems were very serious. In 2007, YouTube launched a copyright filtering system to automatically delete copyright fragments, giving the platform and users greater protection and freedom. YouTube also launched an online editing tool, where users can edit videos online and share content with one click. YouTube’s login logic, subscription logic, search logic, and sharing logic all rely on recommendation algorithms. Its machine learning and artificial intelligence technology can even achieve targeted acquisition of new users.
With the blessing of Google, YouTube has been at the world’s leading level in the research of streaming technology. But the two add up, and the explosive power generated is much more than that.
At that time, Google’s products had completed globalization. The first thing YouTube joined Google was to translate itself into various languages and promote it to the world. In addition to solving the problem of where the server is, they also need to study the laws of various countries to avoid the trouble caused by cultural differences. Google is a perfect guide in this process.
In September 2007, YouTube entered more than ten countries including the United Kingdom, Japan, Brazil, and Australia. In May 2010, YouTube had more than 2 billion daily views, which is the sum of the three major broadcast services in the United States. YouTube users upload videos for 60 days, which is longer than the content of the three major broadcast services for 60 years. The YouTube website can also be automatically translated into 51 languages, making it spread rapidly worldwide.
With the growth of a large number of users around the world, the cost of broadband, which once made YouTube difficult, is bound to rise. When the outside world suspected YouTube’s ugly financial data, YouTube told the outside world that the bandwidth pricing model “does not apply to me.”
Google used to buy optical fibers that some telecommunications companies invested in but did not put into use. The industry commonly called them “dark optical fibers.” Google can not only use optical fibers to transmit data to all parts of the world, but also use these optical fibers to sign broadband exchange agreements with other ISPs. This makes Google’s broadband cost almost zero, and all the costs are only the depreciation of fiber and routers.
So the amazing bandwidth cost calculated according to the traditional model does not exist on YouTube. In addition, in February 2010, Google exchanged shares of On2, a well-known US video compression technology manufacturer, to help YouTube further reduce broadband costs. In 2013, in order to increase the service speed of YouTube and Gmail in the Asia-Pacific region, Google built data centers in Taiwan, Hong Kong, and Singapore to further reduce costs.
After Google acquired YouTube, in June 2011, Google established Google+, which combined Google with social functions. While Google ’s business sector continues to expand, the combination of the two has made YouTube invincible.
It is also the blessing of Google that has made YouTube’s success innumerable. It is naturally very difficult to build a YouTube from scratch.
3. Commercialization: YouTube’s pain and future
In 2007, Justin Bieber’s performance video on YouTube became popular. YouTube embodies people’s desire to show, share, adore and reject “boring”. Many video enthusiasts flooded YouTube, and keen politicians also came. In addition to the opening of a YouTube account by the British royal family, Obama even started to help the 2008 presidential campaign through YouTube, and YouTube’s social influence is evident.
With the increase in the number of users, YouTube has transformed from an early site that shared home videos to a mainstream entertainment provider. It began to cooperate with relevant institutions, and gave equal emphasis on the production of personal and institutional content. In May 2007, YouTube launched a revenue return program. If the video has been played more than 1 million times, users can get thousands of dollars in return. There are a lot of content producers, so it has reached more than a million dollars in revenue.
Advertising revenue sharing is YouTube ’s main profit model, and content sharing with users encourages more professional video shooters to enter. YouTube constitutes a complex content ecology. On the surface, it looks like an individual professional producer, constantly sending content to the platform and getting a share. In fact, these producers are gathered under various MCN institutions. These MCN institutions were founded by experienced Hollywood producers, and they have functions of content management, star brokerage, advertising agency, etc., and divide the revenue into content producers and platforms in proportion. In this way, YouTube earns a share of every income of content producers, thus forming a positive cycle.