As YouTube marches towards greater market share of viewers and video streams, “It’s YouTube’s world, we just stream it.”  But can you build an audience on or outside YouTube?

The reality is that unless content creators rely solely on licensing sales, they need to build advertising revenue.  In theory, that means that content creators are in the business of maximizing their audiences.  But only when that audience is on one’s own-and-operated property can the right holder fully monetize it.   In a distributed model, the content owner and distributor face sales channel conflicts, reduced margins, and unsold inventory.

Distribution vs. Destination

It’s challenging for a company with no offline brand, celebrity cachet or multimillion-dollar marketing budget to build a destination around video content. 

Indeed, while YouTube owns video in the figurative sense, it’s not a monopoly in the literal sense.  comScore’s list of top 10 video properties shows aggregators or traditional media companies: YouTube, VEVO, Facebook, MSN, Viacom properties, Yahoo, AOL properties, Turner Digital, Hulu and NBC Universal.   The traditional media companies have proven that if you hold back distribution, people will come to you if you have compelling/popular content and an offline brand.

Where and why do people watch videos outside YouTube?

This doesn’t mean that it’s impossible to generate views on one’s own site.  After the top 10 properties on comScore,

1.  Other aggregators such as Metacafe, DailyMotion, Break or Blip boast high/medium reach.  Metacafe and DailyMotion have sought to emulate YouTube’s strategy; Break branched off into original content; Blip seeks to aggregate original series made for the web, but it encourages producers to also syndicate to YouTube, according to CEO Mike Hudack.

Aggregators will leverage their massive catalog and multiple inbound links to index higher than the underlying content owners’ website on search engines even if the video originated elsewhere.  As a content creator you can avoid distributing to the aggregators altogether, but then you might miss out on the largest video audiences.  In fact, according to Mefeedia, the number of content producers who had their own sites fell from 30% to 10% from 2007 to 2010.

2.  News sites have timely content that draw users, be it CNN, BBC, the Australian, al-Jazeera English or local stations.  Meanwhile, TechCrunch TV can leverage the archive of blogs and news-breaking new articles to point traffic to videos, let alone AOL or HuffPo traffic since its acquisition (worth noting that TechCrunch’s traffic would be included in AOL’s and CNN in Turner’s).

3.  Humor sites such as FunnyOrDie.com, which has successfully leveraged Will Ferrell’s brand name to build a real business; TheOnion.com that has leveraged its satirical take and offline mojo to successfully transition into video; or College Humor, which restricts content to its site and uses what it does publish on YouTube to draw users back there.

4.  And of course, Adult sites remain more popular than ever, especially as they embraced the free “tube” model, too. 

Value = revenue / cost (basically)

Most of the new media content producers around today are part of the Third Wave of video creators.  We have all benefited from YouTube:
 
a) investing in the technical infrastructure (hosting, encoding, ad serving etc.) and
b) the search engine marketing/optimization (a cynic would say “not surprisingly,” since Google owns YouTube, but in all fairness, YouTube was well on its way to being the second search engine when it was sold to Google).

These two are expensive money-sucking cost-line items, so while it’s easy to complain about distributors building their businesses on top of a content owners’ back, a more level-headed perspective is required.

Exacerbating all of this is videos’ long-term payoff. While you can write an article and publish it and before long search engines will send you traffic, with videos there are other challenges.

Erosion of pre-roll CPM

The reality is that for all of the talk about a lack of supply of videos, CPMs are — at the aggregate level — falling precipitously.  The reasons for this merit an article by themselves, but unless you have massive streams, you won’t be able to close direct deals, having to rely on ad networks to fill your inventory; your ad rates won’t be as lucrative as you might think.

Bye-bye Margins

The combination of high video-related costs, a long-term payback and eroding ad rates means lower margins in the short-term and unprofitable operations over time, which explains why content companies have either shut down altogether or moved into aggregation.  I think having a low-cost structure is the single top variable determining who has survived.  After all, Apple wouldn’t be as valuable if it didn’t outsource production to China. It’s no different in video, though I don’t think you can outsource content production to China.

The comScore effect

Of course, until last month, it might have been worthwhile to try to build views on your own property.  Today, with comScore and YouTube finally partnering to open up audience sizes for each content provider on YouTube, you’re almost better off putting up the white flag and simply focusing on amalgamating your viewers and views on either your own site (if you have any traction there) or YouTube.