Why YouTube's desperate revenue hunt is on the money
CEO Eric Schmidt botched Google's $1.65 billion acquisition of YouTube. Under his misguided traffic-first strategy, the online-video site has seen off would-be rivals, but failed to grow a business. When he decided, rather late, to make revenue a priority, he wasted time looking for a magical new ad format. (The one result of this effort, YouTube's InVideo ads, which are overlaid over a video as it plays, seems to be a complete failure.) Now, YouTube cofounder Chad Hurley admits there is no "silver bullet." YouTube has abandoned one of its shibboleths — that viewers are turned off by "preroll" ads which play before a clip — and is experimenting with a number of moneymaking schemes.There's more than a hint of desperation around YouTube's scramble. And that's as it should be. Google, in its early days, scrambled around for a business model; at one point, it thought it might do enterprise software, which is how it ended up with Schmidt, a former computer scientist, as a CEO. Mistakes happen. And that's the point: YouTube needs to make mistakes, lots of them, fast. Google's advertising business is, for now, gushing cash, giving YouTube some room to maneuver. But shareholders are not infinitely patient. The more ways YouTube tries to make money, the better the odds it will happen on something that works. It needs to carefully measure what's working, and tweak its efforts. This kind of mind-numbing lather-rinse-repeat gruntwork is actually something Google is good at; feed its engineers data, and they'll come up with an algorithm for success. What Google can't afford to do is waste time chasing some impossibly elegant solution which springs, full-grown, like Minerva from the skull of Google god-king Eric Schmidt.