YouTube is at the center and at the forefront of some key trends that affect the world of marketing. The three most important are increasing bandwidth, user-generated content and social networking.

1. Increasing bandwidth in developed countries is what makes video viewing on the web and video sharing possible. According to a study by Gartner, published in July 2008, “Consumer broadband penetration worldwide will grow from an estimated 323 million in 2007 to 499 million in 2012.”

As a practical matter, Gartner’s projections contend that broadband penetration of the consumer market will be above two thirds of households in almost all developed countries by 2012. For YouTube this means substantially bigger audiences, increased sharing and a substantially higher level of user-generated content.

2. User-Generated Content (UGC). This is an area where YouTube is at the forefront. Not only is the vast majority of the video on YouTube generated by users (29 percent of them have uploaded a video within the last three months) but commenting and rating are key activities that constitute content and simultaneously help determine the viewing performance of the associated videos.

3. Social networking sites are obviously amongst the hottest internet properties today. YouTube is a part of it in a unique way. The purpose of social networking sites like MySpace or Facebook is to help people connect with their friends and to find others with whom they have something in common. But YouTube is not a social networking site.

Jon Gibs, senior director of media for the market research firm Nielsen/NetRatings follows the social networking sector. He says of YouTube: “You don’t create a buddy list and share your buddy list, but you do have consumer generated (or at least consumer-added) content. You have tagging around that, and you have conversation around that, and you have association between elements. To me that’s social networking.”

Even so, Gibs describes YouTube as “a video-sharing site with social networking tacked on.” That’s a good way to consider the marketing power of YouTube and it’s an important one.

The true social networking sites are the converse – users can add video but the video (typically user-generated snippets of films, TV shows and comedy clips) is generally secondary to the “friends” motif.

YouTube will increasingly become a more hospitable environment for marketers. If you have a good video, like the Sephora videos, they can carry your brand message without conflicting with the purpose of the site.

Key Point

Because of its video focus, YouTube should offer more marketing possibilities and flexibility than the social networking sites.

YouTube today is uniquely positioned as a marketing channel on the net. And we have a good idea of how it will develop in the months and years ahead.

YouTube will Develop in Some Predictable Ways

Thanks to academic studies of the way consumers adopt innovations, we have a good idea of how YouTube will develop over the next few years. We think that YouTube will follow the patterns and timelines of the consumer adoption of technological innovations such as the internet and television. The basic trails are well-blazed.

Consumer adoption of technological innovation moves from younger to older people. Young people adopt or grow up with innovations. As they age, the proportion of older people in the total population using the innovation increases. You can count on the user base for YouTube to get older until it is more like the total population.

Consumer adoption of technological innovation moves from urban to rural locations. In the case of YouTube, that is likely to be an infrastructure issue. The number of broadband connections will need to increase in rural areas before the number of YouTube users will increase but you can count on the YouTube user base to become more evenly distributed geographically.

Consumer adoption of technological innovation move from more affluent to less affluent households. In countries where broadband is not subsidized that means that YouTube use is likely to move down-market as more broadband connections become affordable. You can count on the YouTube user base in the future to more accurately reflect the income distribution of the countries where you do business.

Consumer adoption of technological innovation moves toward the mainstream at a predictable pace. It takes most technological innovations about fifteen years to move from first public trials to a saturation point. If YouTube follows a similar pattern, saturation will come around 2020. But there’s a more important point to pay attention to for marketing purposes.

The adoption curve for most innovations is an S shaped, or Sigmoid, curve. The log phase of the curve, the part with the most rapid growth, usually begins around two years in and lasts until the midpoint is reached.

Using our dates from YouTube history, the upturn should have been around early 2007. But the YouTube curve turned up earlier.

If we use videos viewed as a guide, the fast-growth phase for YouTube began in the first quarter of 2006 when usage was almost doubling every month. That early turn was the result of two things. First, YouTube was an elegant service, a simple solution to a mass market problem. Second, the enabling technology, broadband connectivity, was already in place for many affluent households.

If you’re a marketer, what’s most important is that the time from the introduction of YouTube to the midpoint on the adoption curve is likely to be seven years. That means that by 2012 at the latest the mainstream adopters will be onboard in the US and the UK. In other countries, that date may move slightly in either direction depending primarily on the prevalence of broadband connections.

That gives you a window of less than two years to gain some early-mover advantage.

Action Ideas

Act now to gain a presence on YouTube and position your company so you’re established by the time the mid-point of adoption is reached.

Mine the video you already have. Just be sure to edit your clips for a length and tempo so they fit YouTube.

Key Points

However, be careful, just because you have video doesn’t mean it’s good or meaningful to the people in your market. Either modify it so it is, or don’t use it.

Key Points: Just because it’s easy to do, doesn’t mean it’s the right thing to do. Check everything you intend to post on YouTube to make sure it represents your brand and moves your mission forward.

Google’s Purchase of YouTube is Good for Marketers

Google’s ownership of YouTube is important for marketers. Google brings three key strengths that will further improve YouTube’s marketing attractions.

Google is highly business oriented. At the time when Google announced the purchase of YouTube. Google executives declared that one of their key objectives was to “give professional content owners more opportunities to get their work out to a wider audience.” Google was started with the goal of being a successful business and the founders have consistently acted with a business focus. Google will therefore act to make YouTube more valuable to advertisers and more profitable for them.

Google has excellent development capability. The company has made its mark developing algorithms that deliver content to searchers and searchers to advertisers.

Google has lots of money and patience. Google CEO Eric Schmidt has described monetizing YouTube through ads as “the holy grail.” Finding it means trying different forms of advertising. Google intends to leverage those strengths.

Here are some of the ways in which we believe Google will further improve YouTube for marketers.

Google will find new ways to grow its audience. This will happen by raising the quality of content to attract more viewers to the site for longer and by multiplying the number of ways to access the site.

Improving the quality of content will happen progressively through agreements with owners of desirable content. The agreement with Lions Gate, announced in July 2008, is an example.

YouTube will also expand its viewing audience by being available on more devices. That includes mobile phones, iPods and critically importantly, home TV. In the US, TiVo, the provider of technology and services for digital video recorders (DVR), announced in March 2008 that it will offer access to YouTube videos directly from the TV via a TiVo DVR. IPTV is very likely to be the next revolution in consumer technology and YouTube will be a major beneficiary when it arrives in early 2009.

Google will find new ways to deliver ads. So far this includes pre roll and post roll ads and “in the chrome ads” placed in the frame around the video. According to C-net, so far “the company is happiest with in video ads that are embedded across the bottom of the video area itself.”

Example of a pre-roll ad on YouTube:

There’s bound to be more. Since August 2007, ads have been placed in a transparent overlay at the bottom fifth of the video window on material licensed from media companies. Product placements in videos have been appearing since 2007 as well. Tests of other possibilities are ongoing.

Key Point

Google will continue to introduce new ways to serve the needs of marketers and content providers to the benefit of both.

Google will develop new service offerings for marketers. For example, in May 2008, Google introduced a service called “Buzz Targeting.” The service uses an algorithm to locate videos that are about to “go viral” by monitoring blog traffic, IMs and email. Ads will be overlaid on the bottom fifth of viral videos supplied by YouTube partners who then share in the ad revenue.

Google will develop sophisticated analytics for marketers who use YouTube. Analytics is a Google strength. The company already provides analytics for web masters and participants in other programs. And it’s started to do the same for marketers using YouTube.

In March 2008, Google introduced tracking software on YouTube that provides video viewing information. The information includes when and where the video was viewed. Some information is only shared with paid advertisers and partners. They can learn, for example, how many viewers watch 25 percent, 50 percent or the entire video.

YouTube today offers you a dual challenge. It’s already a market and marketing venue that you can exploit, so you have to understand the YouTube of today. YouTube is also developing in ways that will make it more attractive still to marketers and to more marketers in the future. YouTube Revealed contains a wealth of information to help you meet both challenges. We’ll start by looking at who uses YouTube today.