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Business Impact

Will a YouTube Platform Matter?

The video site will let people do more with their clips, like watch them on TiVo.

Bloggers and other website managers have long been able to embed videos hosted by the online video site YouTube in their own pages. But on Wednesday, YouTube announced that it would give computer programmers access to some of the technology that underlies its site. The company’s goal was to involve itself in other methods of distributing Web video–not just YouTube.com, but websites and services that include TiVo, video games, and Webcam software.

New tube: TiVo is building a service using YouTube’s new open platform, which will let people watch clips from the online video service on their TVs.

“For users, the exciting news is that they will be able to actively participate in the YouTube community from just about anywhere,” says Jim Patterson, YouTube product manager, “including the online destinations and Web communities they already love and visit regularly.”

In other words, YouTube–which Google bought last year for $1.6 billion–won’t be just a website that lets people view, rate, and comment on videos. It will be a platform upon which software developers can build their own video-player interfaces, customized video, and search tools. Ultimately, users will be able to upload video from sites built on the YouTube platform, instead of having to go to YouTube.com. Later this year, the company will offer another service that will let viewers log into YouTube and watch videos via their TiVo set-top boxes. The service will be available to people who have broadband connections and a Tivo Series 3 system or an high-definition set-top box. (This isn’t the first time YouTube has found its way to the television: Apple TV started offering built-in YouTube access last year.)

But there are key differences between YouTube video and the content typically viewed on a television. “What YouTube has shown is that online video represents a new medium that’s much more about bite-sized morsels and things that are conducive to the small screen and short attention spans,” says Bruce Leichtman, president and principal analyst of Leichtman Research Group. Because YouTube’s low-resolution clips might not look good when expanded to fill a TV screen, says Tara Maitra, vice president and general manager for content services at TiVo, the TiVo service might restrict them to just a small part of the screen.

Certainly, some people will be excited to learn that they will no longer need to gather their friends around their computer monitors to watch their favorite YouTube clips. But Leichtman says YouTube on TiVo will really affect only a small number of people. “We have to keep this in perspective,” says Leichtman. The YouTube-ready TiVo boxes are “representative of less than 1 percent of all households. It really adds no breadth.”

YouTube applications developed by other companies, such as game developer Electronic Arts (EA) or online-slide-show maker Animoto, might have more traction. EA plans to release a YouTube feature in its game Spore, in which players build their own creatures. “When a … user finishes creating their creature, they have the option to record a short video of their creature in action,” says Brandon Barber, director of entertainment development and programming at EA. “This can be uploaded to that user’s YouTube account in a few clicks.” Since sharing parts of games is something that gamers already do, the combination of EA and YouTube is natural. Animoto has integrated a single-click option that lets a user quickly share a photo slide show on YouTube, also a natural combination of services.

Exactly how YouTube will make money from its platform remains unclear, however. YouTube has said that there is no revenue-sharing model built into its open platform, but in that respect, it’s not alone. The social-networking websites Facebook and Twitter, which supply platforms for developers to use, have no clear profit model either. YouTube contends that as more software and services are built on its platform, more users will sign up for them. Ultimately, that large audience could translate into revenue through advertising. At this point, however, none of these companies has implemented a reliable method for making money from its audience.

“I think, at its core, with all the success of YouTube from a viewer standpoint, one still has to ask, ‘Where’s the money?’” says Leichtman. “The knee-jerk way is advertising,” he says. But as Google expands the YouTube service, it has to look for new ways to make money, he says. “YouTube is a phenomenon,” Leichtman says, “but it’s not a revenue phenomenon.”

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