Yesterday's YouTube advertising news started off for many as just another cosmetic technology upgrade announcement. But it soon became clear that the change was more important and had wide implications for the future of online video. After perusing the IBM report released yesterday, which was chock full of rich survey data, we decided to pose a few questions to IBM's Bill Battino, communications sector Managing Partner for IBM Global Business Services.
Wired News: In light of your findings regarding the changing viewing habits of consumers (from TV to Internet), what do you think the new YouTube ad model/revenue sharing with video creators means for the near future of broadcast television vs. Internet TV?
Bill Battino: Evolving business models that share ad revenues with individual video creators, as well as new technologies that enable amateurs and semi-professionals to create lower-cost advertising content, will put cost pressures on the traditional players. Although our consumer survey shows the majority of respondents who contribute to social networking and video sites tend to do so for recognition (or fame), versus fortune.
Our upcoming "End of Advertising As We Know It" paper shows advertising professionals expect a significant part of content to be user-generated in five years – from almost 15 percent of TV time to 25 percent of PC time. These new models will be a major step forward and represent the maturation of the Internet. The vast amount of testing that has been done to make the models as unobtrusive and unoffensive as possible will advance consumer acceptance. For TV, this will be a positive step as well in terms of improving relationships with companies like Google and the broadcasters because the model is confined to a specific subset of monitored content.
Wired News: If most TV moves to the Internet, do you think the infrastructure/pipes can handle such increased data traffic?
__
Battino:__ The question is when, not if. Delivering all but the most basic digital content services over networks that were originally designed for voice communications and Web browsing is challenging, and telecom, cable and satellite operators will, in all likelihood, have to upgrade their networks to compete. Even with higher compression technology like MPEG-4, delivering HDTV, multi-room TV and the like, as well as voice, gaming, Internet surfing and other communication services means that every home must have a bandwidth of 20 megabits or more.
As demand for high-definition television (HDTV), real-time video on demand (VoD) and other next-generation services increases, we are heading toward a bandwidth crunch in many countries with the possible exception of parts of south-east Asia including Singapore and Korea, where 95 -100 percent of households can obtain very high speed access.
To deliver bandwidth-intensive content services and the experience consumers demand, telcos and distributors will have to make major investments in upgrading their networks. We anticipate that the investments going into IPTV through Fiber-TV, will accelerate bandwidth dramatically, as well as VC investment in wireless technologies.
__
Wired News:__ We hear a lot of talk about the Internet democratizing content distribution, but what are the real chances that other
YouTube-like networks (not owned by major corps) will be able to compete with YouTube and the major studios rolling out their own mini-online networks (such as ComedyCentral's Motherload)?
__
Battino:__ Never underestimate the creativity that can come from the VC
and private equity community. Just as people thought MySpace had a monopoly, you saw other entrants (e.g. Facebook) generating interest levels. We may see some backlash against the big players, which will open up the window for new entrants. Also, our survey found that the majority of individuals visited sites based on recommendations from their peers; this also leaves an opening for new entrants. Finally, keep in mind that many of the sites now owned by major corporations started as independents and were then acquired.
