My 3rd Internet Commerce and Consumers assignment in which I analyse the way YouTube does business. This is for educational purposes. No plagiarism intended.

1. ANALYSETHE DEGREETOWHICH
INTERNET BUSINESS HAS MATURED/IS
CONSTANTLY DEVELOPING AND
INNOVATINGUSINGTHE DETAILED CASE
STUDY OFYOUTUBE
RAMNATH Oorvesh Ewam
MOSAHEB Hashmi
NAUTHOO Junaid

2. TABLE OF CONTENTS
• What is an Internet Business?
• YouTube
• YouTube Business Model
• Attention Economy
• YouTube and Attention Economy
• YouTube and NBC Partnership

3. TABLE OF CONTENTS
• Gift + Commodity
• YouTube Partner Program
• Wikinomics
• LongTail Economy
• YouTube and LongTail Economy
• Reference List

4. WHAT IS AN INTERNET BUSINESS (or dot-
com company)?
• Organisation offering its services only on the Internet.
("Internet business |Article about Internet business byThe Free Dictionary," n.d.)

5. EXAMPLES OF DOT-COM COMPANIES
• Amazon.com
• Yahoo
• Google
• eBay
Telecom companies offering voice or video services over the Internet also form part of the dot-com
company umbrella.
("Internet business | Article about Internet business byThe Free Dictionary," n.d.)

6. IMPORTANT!
• For company to be a dot-com company, its service (or software) must be
hosted on the company’s computers and accessed by users over the
Internet.
("Internet business |Article about Internet business byThe Free Dictionary," n.d.)

8. YOUTUBE
• Founded in 2005 by former PayPal employees Chad Hurley, Steve Chen and
Jawed Karim.
• They created a video-sharing website on which users could upload, share
and view videos.
(Hopkins, 2006)

9. YOUTUBE
• Domain name “YouTube.com” activated on February 14, 2005.
• Website made official debut on November 2005.
• One of the fastest growing sites during summer 2006.
(Woolley, 2006)

10. YOUTUBE
• On October 9, 2006, Google purchasedYouTube for US$1.65 billion in stock.
(La Monica, 2006)

11. YOUTUBE BUSINESS MODEL

12. BUSINESS MODEL
• Before being owned by Google,YouTube’s business model was
advertisement-based.
• It generated 15 million dollars per month.
• Advertisements were launched on the site as from March 2006.
(Yen, 2008)

13. BUSINESS MODEL
• It was said that, like several Internet start-ups,YouTube did not possess a
viably implemented business model.
• Its running cost was as high as 5 to 6 million dollars per month.
(Boerland, n.d.)

14. BUSINESS MODEL
• In April 2006,YouTube began to use Google AdSense.
• AdSense allows publishers in the Google Network of content sites to serve
automatic text, image, video or interactive media advertisements that are
targeted to site content and audience.
• Those advertisements are controlled by Google and generate revenue either
on per-click or a per-impression basis.

15. BUSINESS MODEL
• It was reported thatYouTube had subsequently stopped using AdSense.
• It was, however, resumed afterwards but only in local regions.
("Google ExpandsAdvertising Monetization Program for Websites – News announcements – News from Google – Google," 2003)

16. Pay per click (or Cost per click)
• Amount spent to get an advertisement clicked.
• Advertisers pay the publisher or website owner when the ad is clicked.
• Used, along with cost per impression and cost per order, to assess cost
effectiveness and profitability of internet marketing.

17. Pay per click (or Cost per click)
• Pay-per-click ($) = Advertising cost ($) ÷ Ads clicked (#)
("What Is PPC? Learn the Basics of Pay-Per-Click (PPC) Marketing |WordStream," n.d.)

18. Cost per thousand impression (CPM)
• Advertisers pay each time an ad is displayed.
• Refers to cost or expense incurred for every thousand potential customers
who view the advertisement(s).
• Assesses cost effectiveness and profitability of online advertising.

19. Cost per thousand impression (CPM)
• CPM ($) = Advertising cost ($) ÷ Impressions generated (#, in thousands)
("What isCPM? Marketing Definition & Explanation," n.d.)

20. Pay per click vs. CPM
• Pay-per-click has an advantage over cost per impression as it says how
effective the advertising was.
• Clicks are a means to measure attention and interest.
• If main aim of an ad is to generate a click, pay-per-click is the preferred
metric.

21. Pay per click vs. CPM
• Once a certain number of web impressions are achieved, quality and
placement of the advertisement will affect click through rates and the
resulting pay-per-click.
("What Is PPC? Learn the Basics of Pay-Per-Click (PPC) Marketing |WordStream," n.d.)

22. ATTENTION ECONOMY

23. ATTENTION ECONOMY
• Approach to the management of information that treats human attention
as scarce commodity.
• “Attention is a scarce resource”
(Goldhaber, 1997)

24. YOUTUBE AND ATTENTION ECONOMY

25. YOUTUBE AND ATTENTION ECONOMY
• Attention is the ‘backbone’ of Internet business.
• Media economy was about monetising content channels owned by major
media platforms ( e.g.TV networks and newspapers.)
• Economy has shifted from being supply-based to demand-based, and
attention is the main ‘currency’.

26. YOUTUBE AND ATTENTION ECONOMY
• Internet users spend that ‘currency’ in several ways such that digital-only
platforms (YouTube, Facebook) are best equipped to monetise it.
• This is why, today, professionally authored videos are found onYouTube.
(Ingram, 2015)

27. YOUTUBE AND NBC PARTNERSHIP

28. YOUTUBE AND NBC PARTNERSHIP
• On June 27, 2006,YouTube entered into a marketing and advertising
partnership with the National Broadcasting Company, NBC.
• It was done to widen the range of video content available on the internet.
• It was also sign that web-delivered video was expanding from user-provided
content to encompass more legally licensed and professionally authored
work.

29. YOUTUBE AND NBC PARTNERSHIP
• This deal also took place due to the increase in number of views onYouTube.
• In July 2006, average online video consumer watched 100 minutes per
month, a 15 minutes increase from six months ago according to Comscore.
• As per International Data Corporation, online video services would make
$1.7 billion in revenue by 2010, as compared to $230 million in 2005.
(Wharton University of Pennsylvania, 2006)

30. GIFT + COMMODITY

31. GIFT + COMMODITY
• YouTube is based on combining the gift with the commodity.
• The first is free and second yields profit.
• YouTube gives free access to users and the more the users, the more the
profit it makes as it increases in advertisement rates and gathers more
interest of advertisers.
(Fuchs, 2008)

32. GIFT + COMMODITY
• In May 2013,YouTube started offering some content providers ability to
charge $0.99 per month for some channels.
• The vast majority of its videos, though, would remain free to view.
(Nakaso, 2013)

33. YOUTUBE PARTNER PROGRAM

34. YOUTUBE PARTNER PROGRAM
• Began in around May 2012.
• Monetises aYouTuber’s content, given that no copyright law has been
infringed.
• Includes the option to show ads on video.
• Skippable, non-skippable pre-roll, display and overlay in-video ads are forms
of adsYouTube proposes.

35. YOUTUBE PARTNER PROGRAM
• To earn money and receive payments fromYouTube, one has to monetise at
least one video and associate AdSense to hisYouTube account.
• He will also need to reach his local AdSense payment threshold.
• This also depends on his currency.

36. YOUTUBE PARTNER PROGRAM
• Additional information about earnings – such as estimated earnings and ad
performance based on playbacks and impressions – is as well accessible.
(Beese, 2012)

37. WIKINOMICS (NEW INTERNET
ECONOMY)

38. WIKINOMICS
• New media should find ways to make profit out of peer-produced content.
• Principles ofWikinomics: Openness, peering, sharing and acting globally.
• Companies should make use of the above to gain profit with the assistance
ofWeb 2.0 applications.
(Tapscott &Williams, 2006)

39. LONGTAIL ECONOMY

40. LONGTAIL ECONOMY

41. LONGTAIL ECONOMY
“The theory of the LongTail is that our culture and economy is increasingly
shifting away from a focus on a relatively small number of ‘hits’ at the head of the
demand curve and towards a huge number of niches in the tail. As the costs of
production and distribution fall especially online, there is now less need to lump
products and consumers into one-size-fits-all containers. In an era without the
constraints of physical shelf space and other bottlenecks of distribution, narrowly-
targeted goods and services can be as economically attractive as mainstream fare.”
(Anderson, 2004)

42. YOUTUBE AND LONGTAIL ECONOMY
Future of Internet Business is selling less of more?

43. YOUTUBE AND LONGTAIL ECONOMY: Future of
Internet Business is selling less of more?
• Evolution of streaming and payment models in addition to alternative
sources of income like theYouTube monetisation favours the “The future of
Internet business is selling less of more” statement.
("death of the long tail? - iMusician Digital," n.d.)

44. REFERENCE LIST
Anderson, C. (2004, October).The long tail. Wired, (12). Retrieved from
http://archive.wired.com/wired/archive/12.10/tail.html
Beese, J. (2012, May 28). What Is theYouTube Partner Program? | Sprout Social. Retrieved from
http://sproutsocial.com/insights/how-to-youtube-partner-program/
Boerland, B. (n.d.). youtube bandwidth usage: 25 Petabytes per month |Willy Dobbe. Retrieved from
http://willy.boerland.com/myblog/youtube_bandwidth_usage_25_petabytes_per_month
The death of the long tail? - iMusician Digital. (n.d.). Retrieved from http://www.imusiciandigital.com/en/blog/death-
long-tail/
Fuchs, C. (2008). Internet and Society: SocialTheory in the Information Age (8th ed.). NewYork: Routledge.
Goldhaber, M. H. (1997).The attention economy and the net. First Monday: Peer-reviewed journal on the internet, 2(4).
Retrieved from http://firstmonday.org/article/view/519/440

45. REFERENCE LIST
Google ExpandsAdvertising Monetization Program for Websites – News announcements – News from Google – Google. (2003, June
18). Retrieved from http://googlepress.blogspot.com/2003/06/google-expands-advertising-monetization.html
Hopkins, J. (2006, October 11). Surprise!There's a thirdYouTube co-founder - USATODAY.com. Retrieved from
http://usatoday30.usatoday.com/tech/news/2006-10-11-youtube-karim_x.htm
Ingram, M. (2015, August 12). Facebook andYouTube are winning the war for our attention - Fortune. Retrieved from
http://fortune.com/2015/08/12/attention-economy/
Internet business |Article about Internet business byThe Free Dictionary. (n.d.). Retrieved from
http://encyclopedia2.thefreedictionary.com/Internet+business
La Monica, P. R. (2006, October 9). Google buyingYouTube - Oct. 9, 2006. Retrieved from
http://money.cnn.com/2006/10/09/technology/googleyoutube_deal/index.htm?cnn=yes
Nakaso, D. (2013, May 7).YouTube providers could begin charging fees this week - San Jose Mercury News. Retrieved from
http://www.mercurynews.com/business/ci_23184159/youtube-providers-could-begin-charging-fees-this-week

46. REFERENCE LIST
Tapscott, D., &Williams, A. D. (2006). Wikinomics: How mass collaboration changes everything. London, England: Penguin
Books Ltd.
Wharton University of Pennsylvania. (2006, July 12). OnlineVideo:The Market Is Hot, but Business Models Are Fuzzy -
Knowledge@Wharton. Retrieved from http://knowledge.wharton.upenn.edu/article/online-video-the-market-is-hot-
but-business-models-are-fuzzy/
What is CPM? Marketing Definition & Explanation. (n.d.). Retrieved from http://www.marketingterms.com/dictionary/cpm/
What Is PPC? Learn the Basics of Pay-Per-Click (PPC) Marketing | WordStream. (n.d.). Retrieved from
http://www.wordstream.com/ppc
Woolley, S. (2006, March 3). ForbesWelcome. Retrieved from http://www.forbes.com/global/2006/0313/027.html
Yen,Y. (2008, March 25).YouTube looks for the money clip - Fortune. Retrieved from http://fortune.com/2008/03/25/youtube-
looks-for-the-money-clip/