Monetizing Video on the Web: Is Advertising the Answer?

There are more than a few video sharing sites on the Net with no real credible business model in place. From YouTube to the smallest niche video sites, the only answer seems to be advertising. The ad model, however, faces several big challenges, calling into question whether it will work at all.

First, there is the question of intellectual property rights. I would guess that far North of 50% of the videos posted to video sharing sites are posted by someone other than the owner. It is one thing to post short clips of the Simpsons for fun, it is all together another thing for YouTube to profit from it. The minute sites like YouTube make the ad model profitable, there will be a line of content owners and their lawyers at their door as long as the eye can see.

Second, even it the industry could fix the intellectual property problem, there may not be substantial money to be made with ads and video. The highest traffic sites could cut deals directly with advertisers and make a go of it, but the Google Adsense model just isn’t going to pay the bandwidth bill, the secretary’s salary, and provide much of a return to shareholders/owners.

Third, many in the Internet video sharing space are either too young or have too short a memory to remember the advertising collapse during the crash of the Internet boom. Sites that bet their profitability model on a never ending supply of advertising dollars will be running inherently risky businesses that will be at the mercy of ups and downs in the advertising market.

In conclusion, an advertising only business model for video sharing sites is a dubious proposition. Unless the video sharing sites can find another or a mixed business model, most will end of in the Web 2.0 graveyard sooner rather than later.