The YouTube Paradox And The Off-YouTube Solution

When it comes to video distribution on the Internet, there are few solutions better than YouTube. The company is the No. 1 place to search for and find the video content that viewers want to watch, and for creators it provides a size and scale of audience it can offer videos to.

That said, a growing number of YouTube creators and multichannel networks are beginning to grumble about the revenue share that the site has with its partners and their inability to monetize their huge audience of viewers on the site. And, increasingly, they're looking for off-YouTube solutions to better distribute and monetize their videos.

The problem is that distributing video yourself is costly, whereas distribution on YouTube is free. That's one reason that so many creators got started on the platform in the first place. With the shrinking cost of cameras and editing equipment, as well as the ability to upload and distribute their content for free, YouTube had an incredibly low barrier of entry for its creators.

As a result, the platform attracted a huge number of talented creators who have, in turn, attracted millions of fans. For those who weren't part of the traditional TV or movie ecosystem, that created an unprecedented opportunity to get paid to do what they love — make videos and talk to fans. For many first-time YouTube partners, the additional income was likely a nice bonus for a hobby that they never expected to get paid for.

But things have changed over the years. Those same creators now have big audiences and have become their own big brands. The problem is that they aren't getting compensated very well for all that. At least not as well as they'd like.

As the YouTube ecosystem has grown up, it's gotten a lot more professional. With more professional video equipment, more professional editing equipment, more highly skilled creators. Huge networks have popped up — like Machinima, Maker, and Fullscreen — to help creators improve their content and reach. Some provide tools to boost views and reach new audiences, some help with production, some help improve monetization.

But it's become increasingly clear that these businesses will have to find other ways of making money — YouTube can't be their only solution. That's in part because YouTube takes nearly half of all ad revenues from partners. Not just that, but the typical YouTube ads have relatively low CPMs — all of which means that revenues aren't as high as they would like and margins end up being constrained.

The problem is that there's no other solution for easily reaching the size and scale of audience that YouTube offers. For all the talk of some networks creating a YouTube alternative, it will be difficult for them to move the audience over. Not just that, but they won't benefit from all the network effects and video search advantages that they get from being on YouTube.

With that in mind, a growing number of YouTube partners are looking for other monetization options. Some are building apps for mobile phones, tablets, and connected TV devices. The idea is that they'll be able to better these apps through ads, when compared to the revenue share that comes from YouTube's website and mobile applications. They can also own the user experience and have a more engaged connection to their biggest fans.

That is, they're not looking for a replacement for YouTube, but a way to augment their YouTube audience and monetization through other channels. Partners like VEVO, for instance, have been putting a lot of effort behind owned and operated apps for various devices. And more will likely follow.

It might be pricey to build out their own apps, but at the end of the day, these networks will benefit from additional distribution outlets. It's not to become independent of YouTube, but to become less dependent on it.

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