People are flipping out about YouTube Red. Like it was a surprise. Like this is the first time a platform has changed the rules, exerted its power and rocked people’s worlds.
What is YouTube Red and Why Does Everyone Hate It?
YouTube Red is the new $9.99 monthly subscription service that YouTube announced today.
End users had mixed reactions. Some people love that they’ll be able to watch videos without ads and watch them offline. They love that YouTube Red includes streaming music and exclusive content. But many people are pissed off because they think YouTube is now charging for something they used to get for free.
YouTubers — people who create YouTube videos for a living — did NOT have mixed reactions. They hate it. They complained that they were forced to join the service, otherwise YouTube would hide their videos and stop giving them ad revenue.
This isn’t the first time video creators have complained about their YouTube deals and it won’t be the last.
YouTube’s Farm and the Origin of Recurrency
Two years ago I was visiting L.A. and my friend Jason showed me a post he was working on called I Ain’t Gonna Work on YouTube’s Farm No More. The title is a reference to a Bob Dylan protest song and it detailed how he turned down an offer to be in YouTube’s partner program for a second year — and the huge check that came with that offer — because he felt their terms were unfair to content creators.
Jason knew that I was itching to build something big, so he listed everything about YouTube that was bad for video creators. They take a 45% cut of ad revenue. They don’t let you choose how often to show pre-roll ads. They show links to your competitors’ videos at the end of your videos.
There was more. He went on and on, hoping I would be inspired to build a better YouTube. I wasn’t interested.
But his final complaint struck a nerve: “Brian, YouTube owns my subscribers. I have no way to contact the audience I’ve spent years building.”
It didn’t matter if you had 5 subscribers or 5 million. The only way you could contact your subscribers was to either upload a video and pray that YouTube would email them and ask them to watch it or reply to your fans in the comments. Like anyone wants to spend time in the YouTube comments…
Jason showed me how creators would try to get around this problem by making two-part videos, putting the first part on YouTube and the second part on their own sites to try to collect email addresses from those visitors. Because having an email address means you have a direct connection. You own the relationship, not YouTube.
At the time, a single YouTube subscriber was worth an estimated $0.10/year to publishers, but an email subscriber was worth $1.25/year. For Jason’s shows, collecting 100,000 email addresses could mean the difference between breaking even and bankruptcy.
Oh man. Workarounds to capture email addresses? I had seen this before with Facebook and iTunes. YouTube was being an evil gatekeeper.
I was about to uncover my next great mission.
Facebook, the Evil Gatekeeper
Brands spend a ton of money to accumulate Facebook fans. They’ll use facebook.com/mcdonalds in TV commercials instead of mcdonalds.com. And what happens when they’ve spent all that money and packed a stadium full of Facebook fans? Facebook locks the stadium doors and charges the brand to talk to all of those people.
Just a few years ago, a brand’s Facebook post would be seen by roughly 15% of their fans — without them having to pay to promote it. It’s called “organic reach.” Then organic dropped to 8%. Then 4%. Now it’s probably less than 1%. If you see content from a brand today, it is only because that brand paid to boost that post’s reach.
They have a legitimate excuse for this. If you signed into Facebook a few years ago, the Facebook algorithm had only a few hundred pieces of possible content to show you. Photos from your family, updates from friends, news from brands you liked, content from groups you belonged to. But these days there are tens of thousands of potential pieces of content to show you every day. If you check Facebook twice a day and see 30 items each time, that means you miss 99% of what gets posted to Facebook. And it’s easier to charge a brand to get their content seen than your friends and family.
So what’s a brand to do? Of course, they play games to try to get people to give up their email addresses so they can go direct again.
iTunes, the Evil Gatekeeper
The Daily was the world’s first iPad-only news app, the product of a partnership between News Corp and Apple. Steve Jobs himself had a hand in the app’s design process and The Daily had access to Apple’s team and products in Cupertino long before the public was aware of them. It was the first app to have its own Super Bowl commercial.
The Daily’s plan was to build a tablet-based news publication with paying subscribers, but they had no way to directly connect with those customers. Apple owned The Daily’s customers. The Daily just got iTunes customer tokens. No names. No credit cards. No email addresses.
But the team at The Daily was clever. They made their subscribers enter their email addresses if they wanted to leave comments. They even got Apple to add a “Do you want to share your email address with The Daily?” option on the iTunes subscription form.
Sounds familiar, right?
In its 18-month run, The Daily secured 100,000 paying subscribers, had more than a million app installations and they collected an astounding 150,000 email addresses. But they had no way to match an address up with a specific iTunes subscriber. If one of their readers unsubscribed, The Daily had no way to ask them why. If The Daily wanted to send a special discount offer to their mailing list, they were unable to segment that list to exclude their existing customers.
Customer relationship management is impossible when you don’t own the customer relationship.
All of those email addresses were useless.
The Daily had a CRM team that couldn’t do CRM!
By the way, have you tried Apple’s brand new News app?
News brings the beautiful editorial layouts and typography of print to the screen. Enjoy interactive and engaging stories, rich with photo galleries, videos, and animation.
It’s like they’re describing The Daily’s 2011 Super Bowl commercial.
Should You Ever Build a Business on Someone Else’s Platform?
The short answer is: yes!
Instead of foolishly trying to build a YouTube killer, I took my passion for helping creative people tell stories and my experience at building large scale publishing platforms and I zeroed in on the relationship between superstars and superfans. It killed me to think about YouTube owning both the audience relationship and the advertiser relationship. I wondered what would happen if creators could eliminate the need for advertisers and eliminate the platform that holds their customers hostage. Recurrency answers the question, “What if your audience was your sponsor?”
You might think since I’m running Recurrency that I’d be worried about subscription products like YouTube Red or Google Contributor, but I’m not. I know that artists need multiple sources of revenue. I know that artists aren’t going to find the 1,000 paying superfans they need without first collecting tens of thousands of casual fans on ad-supported platforms like YouTube, Facebook and Twitter.
Investor and growth expert Josh Elman gave a talk at the LAUNCH Scale conference last week called “Launching a rocket off someone else’s back.” He explains that all companies begin with zero customers and platforms have a lot of customers. You should always go where the people are.
Zynga famously built a multi-billion dollar video game business exclusively on the Facebook platform. I love this Paul Anthony quote: “Facebook sneezes, and Zynga catches the cold.” Regardless of the constraints they struggled with being so tightly attached to Facebook and their ups and downs as a publicly-traded company, Zynga is still worth 2.2 billion dollars today.
Shayan Zadeh co-founded the dating site Zoosk, which launched as a Facebook application. He made a series of video presentations called “Building A Freemium Business On Someone Else’s Platform.” Six minutes into the first video he details their 2008 plans to expand beyond their Facebook platform dependency. Their goal was to finally have a direct relationship with their users.
What was their first step? “Ask for our users’ email.”
So, How Can I Protect Myself From All of These Evil Gatekeepers?
Build your business on someone else’s platform only because they provide you distribution, not because they provide you revenue.
Make sure the platform needs you as much as you need it.
Take advantage of everything a platform gives you, but don’t become dependent on it.
Here’s a clue: if someone asks what you do for a living and you say, “I’m a YouTuber,” then you have a platform dependency problem.
Make sure you always have additional sources of revenue, like recurring crowdfunding, and a direct connection to your superfans. (I can help you with this one.)
Of course that’s all easier said than done.
“I’ll tip my hat to the new constitution. Take a bow for the new revolution. Smile and grin at the change all around. Pick up my guitar and play. Just like yesterday. Then I’ll get on my knees and pray we don’t get fooled again.” — The Who, Won’t Get Fooled Again