Google bought YouTube for $1.6 billion in 2006 and is currently working on some major changes to the website that has brought us everything from Baby Charlie to The History of Dance. The plan is to create and highlight sets of “channels” around different topics such as sports or arts. In essence, the website will try to create online what we think of today as traditional television channels.
The idea is to “get people to watch YouTube the same way they watch TV.” This means an increase in the amount of time a user spends on the site, which currently sits at roughly 15 minutes per day. Recent reports have put YouTube at the world’s No. 4 website in terms of unique monthly visitors; if they were able to keep those visitors on their site for longer and furthermore had “channels” that presumably certain types of consumers were watching they could start to attract ad dollars, including a portion of the $70 billion U.S. television-ad market.
Even with all its success however, YouTube is still not profitable. Will the addition of channels change this? Are there other websites offering a similar product but with a more profitable business model? What will YouTube’s shifted focus on channels and longer content mean for other players in the online streaming video industry as well as television companies and others in entertainment? These are all things an investor should consider when looking at players in this space.