YouTube’s initial $100 million investment into original premium content channels has been amply played up as a bold, risky venture into the TV ad business for the Google-owned company. However, an analysis of various bits of data about the online video portal suggest that the company is getting a pretty substantial return on what is a fairly conservative investment.
According to data from comScore (NSDQ: SCOR) Friday, the time users spend on YouTube (NSDQ: GOOG) is way up year over year. For all Google-owned sites offering video — and YouTube is the primary one– unique users for the month of February increased year on year only around 5 percent to 147.4 million. But the average time users spent watching video on Google sites jumped by 60 percent to 418.2 minutes over that same time period. The data is a sign that YouTube’s sizeable auidence base is beginning to tune in for longer periods of time, rather than simply snacking and leaving. That result is at least in part a function of YouTube’s decision to offer more compelling, longer-form content.
YouTube executives connect that increase to a site redesign in December, which directed traffic towards the longer-form, professional content partner channels; channel subscriptions are up 50 percent since December, YouTube officials told us Friday.
Meanwhile, as Advertising Age interview with YouTube chief content officer Robert Kyncl published Friday revealed, YouTube doesn’t seem to be incurring much risk as it builds on its channel lineup. In fact, it seems to be getting its money back from advertisers almost right away. The company’s investment into 96 individual channel partnerships are described as low-risk pilots, with seed grants to content creators ranging from “several hundred thousand to several million dollars.”
“We are in uncharted waters, and, of course, failures will come with that,” Mr. Kyncl told the publication. “If we don’t have failures, then clearly we are not trying hard enough.”
Kyncl added that we can expect further investment beyond that initial round of $100 million, with money going to both new channel partners and to existing ones that seem to be finding an audIence.
But while the YouTube funds what amounts to around 100 content experiments, it seems to be recouping its investment on a very short timeline. AdAge notes that the company has already signed “eight-figure” advertising deals with GM and Toyota, as well as a seven-figure pact with Unilever, with single-channel sponsorships going anywhere from $2 million to $4 million. Meanwhile, “genre” sponsorships, where an advertiser might buy into a range of say, music channels, go for as much as $62.5 million for a full-year deal.
For perspective’s sake, $100 million is what Netflix (NSDQ: NFLX) is spending to produce the first round of episodes for one original series, the David Fincher/Kevin Spacey-produced “House of Cards.” It’s also less than half of the tab to produce the current Disney (NYSE: DIS) uber-flop “John Carter From Mars” (price: $260 million).