By Ethan Lyon, Senior Writer
YouTube’s new movie rentals signal Google’s development from a humble search engine into a media lifestyle company and ultimately, an integral life-tool. When do you not use a Google product? When you log onto your computer in the morning, first thing is to check Gmail. Someone might send you a funny video on YouTube. Where was that meeting again? Look it up on Google Maps. But before the meeting the client needs the presentation, so you send it as an e-mail attachment via Google Docs. At lunch, you have time to call your daughter to make sure she is feeling better, using your Android. Has she gotten the flu? You check Google Flu Trends to see if there’s an outbreak in your area…
Google’s new move to offer online rentals through YouTube is now saving you a trip to the movie store. YouTube has partnered with the Sundance Festival to offer 5 films to rent for $3.99 each for 48 hours. The offer will run from Jan 21-31, after which YouTube will expand its rental content offerings through partnerships in education and health. The once small search engine has completely and seamlessly integrated itself into our digital and offline lives. We will discuss how Google has developed into a media lifestyle brand and delve into the nuts and bolts of how it’s monetizing its assets to leverage these extensions.
Google’s Monetization Experiments
With the expansion of its product portfolio, Google has diversified its revenue streams. Google’s new move to monetize YouTube’s online videos through rentals might signal deeper issues regarding banner advertising. YouTube hints at the challenges of the traditional ad-based revenue model, “[film-makers] have told us that the ad-supported business model doesn’t always meet their distribution and monetization needs,” states YouTube in it’s blog. While YouTube’s new monetization effort is a nod to the financial difficulties for indie film-makers, ultimately Google is building a platform for future revenue opportunities.
Google has experimented with several revenue models lately. The rumor-mill began swirling about Google’s attempts to implement banner advertising in Google Maps. Might this signal a change in the profitability of AdWords? Does Google’s slowing year over year growth rate — from 56% in 2007, 31% in 2008, and between 3-7% in 2009 — indicate it needs to pursue other revenue opportunities to create a sustainable business?
While Google’s AdWords — its primary revenue source — generated $21 billion in 2008, the number of people who click on display ads in a month has fallen from 32% of Internet users in July 2007 to only 16% in March 2009.
Should Google consider moving into more subscription or rental-based revenue models? YouTube is a leader in online video with an estimated 91.2 million unique monthly users in Dec. 2009. If even 4% of YouTube’s view bought a single video, it would generate an additional $15 million in monthly revenue. Moreover, YouTube could borrow a page from the Netflix play-book and offer monthly subscriptions.
Brand Implications
From the company that wrote the search engine play-book, Google has made significant strides to expand its product offering. Google has acquired numerous companies in media, including YouTube and developed several apps that speak to the company’s ambitions of not only organizing the world’s information, but building a media empire as well.
Google continues to dial-up its efforts to expand its brand — from a free online video site to a digital video rental store. YouTube, Google’s largest acquisition (at $1.65 billion) helped transform the search giant into a media lifestyle company. While historically, YouTube’s competitors include other free online video sites, such as Hulu and network sites, Google’s recent move to rent its online videos have pitted it against Blockbuster, Netflix and iTunes. What does this recent monetization effort signal for Google and its other products? Could we see its soon-to-be-released Chrome OS or Android incorporate AdWords?
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