Has YouTube Found a New Way to Monetize?

Google’s (NASDAQ:GOOG) YouTube could be on the verge of a dramatic shift that will enable it to monetize in a new way and set it up to compete toe to toe with other media giants.

When YouTube started out, it was most focused on having thousands upon thousands of users submitting videos they had created, but that slowly changed as it grew. Eventually bigger companies saw it as an opportunity to distribute content, and now many media companies host content on the site, as can be seen with a quick search for a music video.

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Of course, since YouTube began, it has been adding ways to monetize. So far, advertising has been a key, much like it is for television, radio, and a majority of Internet content. According to eMarketer, digital video advertising was worth $2.93 billion in 2012 and will jump to $4.14 billion in 2013. YouTube is estimated to take a major share of that sum — Pivotal Research estimated YouTube’s ad revenue for 2013 would reach $2 billion, up from $1.3 billion in 2012.

Of course, advertising is not the be-all-end-all of generating revenue in the media world. While it might be a major staple, subscription fees are another way for these companies to make consistent money, and YouTube might be taking the cue.

The video host already has subscription features for users to follow content creators and see when they add new videos, but that isn’t currently a monetized system. There are rental services for videos on YouTube, but the addition of a paid subscription service would be another game entirely.

According to the Financial Times, up to 50 different YouTube channels could be involved in the initial launch of the paid subscription service. Howcast, World Wrestling Entertainment, The Onion, and Machinima — all popular YouTube channels — could be among the partners chosen for the new service. The service could even roll out as early as this week.

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User-response will of course be a major factor in how the implementation of the service pans out. There has so far been very little in the way of costs for YouTube users, and a  paid subscription service could be frowned upon. However, there may be enough users that see the benefits of monetizing, as the channels they like can get more funding and produce higher-quality content.

With around 1 billion users on YouTube, subscriptions could bring in massive profitss for content creators, and that could be turned around to create high-quality content that may even compete on a near-even footing with shows on TV networks. Many major content creators, like Time Warner (NYSE:TWX) and DreamWorks Animation (NASDAQ:DWA) are already behind some YouTube channels, showing that they see clear opportunities available on YouTube.

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Given the limited number of channels that would initially be involved in the service, it seems likely that YouTube will simply test out the feature and see how it fares, later deciding if it is worth expanding.

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