Bear Stearns has come out with a 70 page research report on online video and monetization potential for the major video sites, based on the evolving ad formats and revenue potential for each of them. The most extensive modeling it does is for the biggest video site, YouTube.
—First, it compares the changing demographics of users on YouTube, and compares that to a traditional media company, in this case Time Warner (NYSE: TWX). So, for YouTube, audiences under the age of 25 stream about 27 percent of total videos on the site, higher than Time Warner’s audience of 19 percent. Looking at the more attractive demographic group to advertisers (ages 25-54), 63 percent of YouTube videos were viewed by this group, on par with the level for Time Warner.
—Then it used comScore (NSDQ: SCOR) sales to show that in just ten months (from January 2007 to October 2007), the mature age group contributed increasingly more video streams on YouTube…supposedly more attractive to advertisers.
—Then, based on its own interpretation of user behavior online, it thinks banner ads on the site would remain the main monetization model for UGC sites at least over the next few years….annoyance factor on video ads is one factor against it.
—Then the dive into the model, which we’ve embedded below as a 3 page PDF. It bases the revenue numbers on growth rate of pageviews of YouTube, average CPMs on both banner and video ads, inventory monetizations levels, and then adds in U.S. and international revenues.
—It estimates that YouTube earned $31 million in 2007 and will get $90 million in 2008; it expects revenues to grow to $277 million by 2012, with the primary driver of the growth being the banner ads. On a breakdown for 2012, it expects $165 million from premium/prime inventory (banners etc), $6 million from remnant, and $21 million from video/streaming ads.