While it might seem laughable today, many believed Google were taking a gamble when they acquired YouTube for $1.65 billion in 2006. The video platform had only launched the year before in February 2005, and the company had just 67 staff. Many questions surrounded the acquisition. Could a search engine company manage a media platform? And would brands buy into what was then petty much all user-generated content?
At YouTube, one of the people responsible for bringing in the brand money was Alexandra Levy, who has since founded her own business, Silicon Alley Media, a consultancy based in New York. Prior to joining YouTube, Levy had worked with MTV and NBC, so she was familiar with working with big brands and high quality, premium content. “At that time the dilemma was how to drive brand dollars to Google,” says Levy. “The search advertising side of the business was working but we didn’t have any brand dollars.”
YouTube’s Identity Crisis
“At that point we weren’t even really scratching the surface and there were only two people working to bring brands on board. But YouTube didn’t have anyone with a TV background and there were very few people with traditional media experience working there, and that was what I could bring to the table at the time,” she adds.
Levy’s first job was to manage a team responsible for ‘custom channels’, which was part of the Google Content Network. “At that time, YouTube wasn’t connected to Google in any way and the content network was essentially a collection of publishers, so the idea was to turn the verticals within these ad networks into ‘custom channels’, so, for example, ‘young gamers’ would be a custom channel, and then we had mums etc. The idea was that these channels were more brand safe than just running ads across the Google Content Network. For the first time, Google was offering transparency on where the ads were running,” she says.
Seth MacFarlane and Burger King
“When I started out with the custom channels, I wasn’t sure whether we were going to move the needle when it came to brand advertising. However, I had a fortuitous call with Seth MacFacfarlane’s agent who said they had some great content they wanted to push out across the content network.” That conversation led to ‘Seth MacFarlane’s Cavalcade of Cartoon Comedy’, which was sponsored by Burger King and posted several episodes a month. The content was an overnight success.
“Once Google had acquired YouTube we decided to set up a YouTube channel where people could view all of the content in one place. And that evolved into the idea of destination and distribution, where the YouTube channel was the hub but we could also push content out to other destinations online. At that time we didn’t know if people would actually seek out the channel but, lo and behold, they did,” she says
How the Actors Guild Threw Google a Bone
Levy says the strike Screen Actors Guild’s strike in 2008 helped create the right conditions for getting brands and content creators interested in YouTube. ”There were lots of people looking at digital as a way to get their content out there, and after the success with Seth Macfarlane we thought we could create a little business by working with a variety of content partners, have a few different content channels, which we could distribute the content to to bump up the views. The idea was that advertisers would fund it. This became the three-legged stool model–content partners, distribution channels and brands–that we took to market and we built some big programmes with Pepsi and Burger King, and it was apparent brands understood the value in what we were creating and were interested in testing this new platform.”
Overcoming the Myth of Viral-Only Content
However, one thing Google struggled with in the early days was on the content promotion side. It was all very well putting content up online and indexing it, but it needed to be promoted by YouTube in such a way that people could find it. Levy says that lesson was a difficult one for Google, the masters of content discovery, to comprehend.
“I think it has taken YouTube a long time to work out the importance of marketing and promotion,” she says. “But that’s what creates hits on TV and that’s going to be what creates hits online. We had this great content but it was really difficult to get YouTube to promote it because there was a belief that the community would take care of the promotion. But if you’re going to monetise premium, expensive content you need to evolve the model and invest in advertising and promotion.”
Levy continues, “It was extremely hard to persuade people at Google that they needed to invest in the content if YouTube was going to compete with TV. But the belief at Google was always that ‘we’re not in the content business’, so the advertisers would have to pay for the content production and the distribution, because we weren’t going to produce content before it was sold. So if you went out and spoke to an advertiser, you’d be asking them to pay for the content and for the media to distribute it, but they only felt they were getting value and credit for the distribution.”
The Burger King deal was followed by a multi-million dollar tie up with Pepsi, which Levy said led everyone at Google – from Eric Schmidt down – to start feeling excited about YouTube’s potential. But just as people were starting to celebrate the early traction, the financial crash started to hit advertising budgets. As YouTube was at that point an untested new experiment, the brand money soon dried up. “One of the main problems we encountered was the long sales cycle because you’re creating the content as well as just selling it, which takes time and a lot of different people have to be involved.”
Since that time Levy feels that – even in 2013 – Google is still trying to find the right formula for content creation and monetisation.