Why Can’t Companies Learn How To make Innovation Pay?

What we have here is evidence of a failure to communicate:
http://www.wsj.com/articles/viewers-dont-add-up-to-profit-for-youtube-1424897967

Google can’t figure how to make YouTube pay.  From the article they don’t seem to understand what they have or the long tail that YouTube represents.  Probably because they don’t spend any time using their product.  It’s hard to build on something that you don’t really understand and YouTube is a new way to receive and distribute content.  The key is that content producers on YouTube are diffuse.  YouTube  is the marketplace for the fringes of video.  And that’s a good thing.

Look, one of the biggest draws on YouTube is a kid who reviews toys.  That might be trash by Hollywood’s standards, but a lot of real people like it.  And that pays the bills.  Look at it this  way, YouTube only pays for programming after the ad revenue is collected.  The Youtuber does all the work, provides all their equipment, studio space and is the talent.   All YouTube has to do is host the videos and collect the money. That shouldn’t be hard.

Yet YouTube doesn’t make money.  I understand about bandwidth and startup costs, but the is Google we are talking about.  Presumably Google understands how to run data centers efficiently and manage bandwidth.  So the real reason must be something else.

They spent all that money on content providers. What they didn’t seem to understand was that what happened was that that didn’t add the value that YouTube users wanted.  I suspect that the content that YouTube paid for was the same kind of stuff that the TV people have always produced.  That’s exactly wrong for YouTube.  YouTube is not Netflix or Amazon.  I don’t expect the kind of content that I would get from Amazon on demand from YouTube.

the people they paid money to went to the real content producers and said “we can make you a great deal” and then screwed them over.  The fact is that the channel aggregators didn’t add real value.  They just siphon off money from the people they can persuade to give them control over their content.

Reading between  the lines It’s pretty obvious what’s wrong.  They don’t communicate with the people who use YouTube or the people who provide content.  They are treating YouTube as a new kind of TV channel.  That’s not the right way to look at it.  I don’t go to YouTube to watch what I can on TV, that is if I wanted to bother with mass fed drivel.  I watch YouTube to see the stuff that the great media companies have seen fit to not provide me with.

I watch Dave Jone’s electronics channel at EEVBlog. I watch Ben Heck hack stuff together.  I watch Keith Rucker’s Vintage Marhinery channel.  I watch Keith Fenner and the rest of the machining YouTube videos.  I watch Japanese train videos. I watch “lets play” videos for simulation and strategy games.  I watch Adam Savage build stuff. None of this stuff would be available to me if YouTube did not exist.

This is the sort of stuff that the big media types won’t give me.  The big media types would never consider Japanese train rides an Tokyo video walks as something that would be worth the effort to bother with.  The evidence is though, that stuff like that does find and audience.  At least 10,000 odd views typically.  The machine tool stuff gets about 20,000-30,000 views.

Admittedly, this is about what MSNBC gets, but still in the greater scheme of things, it’s a tiny drop in a huge bucket. But enough drops and the bucket fills up.  The thing is that the most successful YouTubers are the ones who build communities.  John Saunders and Dave Jones, for instance invest a fair amount of time responding to comments. I think that most serious Youtubers work very hard at developing their brand and listening to the audience. They interact with their audience and pay attention to feedback.  That’s the power of YouTube.

Look, it seems to me that YouTube’s  problems could be solved with better communication.  Dave Jones shouldn’t have to post a video about his issues with the comments and other stuff.

Frankly, YouTube could improve it’s communications about changes and feedback from the heavy channel owners.  Look, if you have 216,000 odd subscribers and some, 38 million views, you shouldn’ t have post a video with your pet peeves.

I started a YouTube channel for my videos a couple of years ago.  I know that some people make a pretty good living from videos and I wanted to find out how it worked. MY channel is still a work in progress and I’m not sure exactly where I want to take it.  I’m learning, using experimentation, which means that I will have a certain degree of failure.  That’s OK.  I also look at other people’s videos to see how the people who are successful do it.  Which is how I discovered the importance of communities.

Unfortunately, the same sense of community building doesn’t reach to YouTube itself.  I’ve seen little evidence that the executives really understand what’s going on.  Sure there are lots of kids watching kid stuff.  But there are also a bunch of us adults watching adult stuff and I don’t mean porn.  If you think about it one NYCCNC’s videos is worth far more to Tormach machine as eyballs than hundreds of thousands of kids who won’t buy much more than soda and beer.  Tormach is looking to sell machines that run up to $20k and looking at people like myself to want to buy them.   That’s leverage.

The People at YouTube though, can’t keep themselves from using the old selling soap model that’s driven television for decades.  Never mind the fact that A. the eyeballs for soap are already saturated with soap ads, and B. there’s only so much soap to be sold.  There are all sorts of things that can be sold.  There’s a huge long tail of stuff out there that right now has now video advertising at all.  Here’s a case of two interests finding each other, Keith Fenner of Turnright MachineWorks and Lovejoy couplings:

This is the sort of relationship that plays to YouTubes strengths, yet the people in charge are selling soap.   I can understand that. Especially   When I found out that the CEO came from Harvard.  Look Harvard is great as a social uplifter.  An incubator of new ideas, not so much.  But are great socializers what innovative businesses need?

This isn’t only Google’s problem.  It seems to me that most of the companies in the US have the same problem.  It seems to come from the fact that many of the people at the top have never learned the businesses they run.  If your selling soap and soda this isn’t much of a problem.  The logic for that kind of business is pretty cut and dried.  For a business that has to break new ground, it’s a disaster, as Apple found out during the Sculley years.  Innovation requires hands on direct decision making from intelligent and informed leadership.  Unfortunately that’s not the kind of leadership in American business today.

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