Video Cameras in iPods: Bad News for YouTube?

Within the first week of Apple's new iPhone 3GS being available, YouTube reported a 400% increase in mobile video uploads. Now TechCrunch reports a rumor that the next generation of iPods Touch and Nano will have video cameras. If so, the Google-owned site could soon be on the receiving end of a lot more one-the-go content.

This is bad news for Flip video cameras and their ilk. But it's also potentially bad news for YouTube and its bid to reach profitability. Here's why: YouTube users are already uploading 20 hours of video a minute to the service and, thanks to dead-simple, one-touch uploads on iPhones and iPods, that will quickly increase. Of course, these are precisely the videos that YouTube can't monetize and that advertisers don't want. As of this spring, YouTube had sold ads against only 9% of videos in the U.S.

Sure, more uploads will increase YouTube's market dominance, but the user-generated video market has little if any advertising dollars pursuing it. Meanwhile, YouTube is spending $83 to $375 million on bandwidth and storage per year, depending on which estimate you believe.

Further, more user-generated material makes it harder for YouTube to direct viewers to the ad-supported video that could, one day, pay its bills.

So, how beneficial is a glut of spur-of-the-moment video uploads of people crushing soda cans or a friend's recent wedding? Will marketers be clamoring to put their ads next to a majority of these mobile-video uploads? Probably not.

As Malcolm Gladwell pointed out in last week's dissection of Chris Anderson's "Free" (Excerpted on AdAge.com by Henry Blodget): "When you let people upload and download as many videos as they want, lots of them will take you up on the offer. That's the magic of Free psychology: an estimated seventy-five billion videos will be served up by YouTube this year. ... The problem is that the videos attracted by psychological Free -- pirated material, cat videos, and other forms of user-generated content -- are not the sort of thing that advertisers want to be associated with."

Clearly, YouTube doesn't see it that way. It's actually encouraging more folks to upload their mobile videos to the site, launching a contest where users tag videos "mobiletest" and try to make them go viral through their social graphs.

The way we see it, there's one pro-monetization argument YouTube could make: The more videos uploaded, the more crap we'll have to sift through to find what we're searching for. And helping people do that is a business that's turned out pretty well for YouTube's parent company, Google.

Contributing: Michael Learmonth