Why YouTube Will Sink or Swim With Obama Girl

'Midtail' Content Safer for Advertisers Than User-Generated Fare

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NEW YORK (AdAge.com) -- Forget Hollywood. YouTube's future lies less in "Desperate Housewives" and more in low-budget fare from producers such as Next New Networks, Machinima, Howcast and MondoMedia. That's because for all the sound and fury over studio deals, long-form content just isn't that popular on YouTube. Rather, it's the so-called midtail content, which fills a niche somewhere between studio-produced and user-generated fare, that's exploded.

It's a category that didn't really exist before YouTube, but will play more than a bit part in its future because it supplies the biggest pool of brand-safe ad impressions, fertile ground for YouTube's overlays and banners, and malleable content for brand integrations it can peddle to Madison Avenue.

2 billion views
The top-100 midtail producers -- including names such as College Humor, Smosh and MyDamnChannel -- have racked up more than 2 billion views during the past six months on YouTube, growing nearly 5% a month on average, according to video analytics firm TubeMogul. Meanwhile, the full-length hour-long and half-hour TV shows on YouTube, 3,215 episodes in all, have accumulated 19.5 million views.

YouTube's biggest TV partner to date, CBS, has only 6.9 million views across 315 TV episodes in the year it has had shows on the site, which represents the equivalent of a bad night for "Two and a Half Men" on TV, and a mere speck on the 1.5 billion views YouTube streams around the world each day. (Granted, part of YouTube's dismal numbers for studio-produced shows are because its TV catalog consists of titles such as "I Dream of Jeannie" and "Fantasy Island," not current hits such as "30 Rock" and "24.").

"The closest thing as made-for-YouTube is this midtail; it's more snack-size -- you're watching at work when you have less time," said TubeMogul CEO Brett Wilson. "As audiences grow, this will be more profitable for YouTube than selling ESPN's content."

It is becoming even more important now that most of the valuable rights to major TV shows are locked up with Hulu for the next two years. But even if YouTube gets more studio content -- or a distribution deal with Hulu -- it's hard to see Google making a business out of YouTube without cultivating a healthy ecosystem of semi-pro or midtail video, whose brand-safe content has devoted, if small, audiences and is unencumbered by complicated rights issues around pay TV, DVD or international windows.

"Our shows are built to be semi-pro, a whole step up from user-generated but not intended to feel like heavily produced television," said Lance Podell, CEO of Next New Networks.

Not major money-makers
Making video for YouTube isn't making anyone rich, and production companies producing web fare operate on very low overhead and tiny margins, if they're making any profit at all. At least two have folded during the recession, ManiaTV and 60Frames. Several others are heavily venture-backed, and need to scale quickly.

But as audiences grow, they become more attractive to marketers looking for cheap video integrations. YouTube producers with their own sales operations routinely include YouTube in agency pitches, giving them entrée to brand-advertising dollars. And small content partners are routinely part of YouTube's pitch.

A few producers earn in excess of $1 million a month in the form of advertising revenue-sharing deals with YouTube, where the producer typically gets 55% of the gross. And because many of these companies live or die on small YouTube tweaks, such as a change to the home-page architecture, Google's VP-strategic partnerships, David Eun, includes YouTube's partners in talks about its plans through a program it calls Strategic Partner Development.

Some producers privately grumble that YouTube isn't doing enough and has courted Hollywood at their expense. It is making concessions to Hollywood that it won't grant to indie content providers, such as integrating proprietary video players for Disney and creating a "shows" section of the home page to showcase TV content away from the user-generated hoi polloi. YouTube softened its TV-only stance in that section, but it's unclear who will get showcased and who won't. Spokesman Aaron Zamost said YouTube is "flexible" on the content that ends up there and wouldn't rule out "graduating the most popular content from these kinds of midtail partners to the 'shows' section." The genre, he said, is a key way YouTube hopes to boost the percentage of videos it can sell to advertisers.

YouTube has begun working with Blip.tv, which is accumulating 70 million views a month with energetic little web shows such as "Average Betty" and the "The Mortified Shoebox Show," and Freewheel, a video-ad server founded by ex-DoubleClick execs that makes it easier for both producers and YouTube to sell video ad inventory.

"In the end, what works for YouTube is to be the default place to watch video online, like Craigslist for classified ads or Google for search," said Jim Louderback, CEO of Revision3. "In order to do that, they have to have everything there."

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