Video Sharing Incumbents and NFTs
It has finally happened. YouTube is looking to get on the web3 train.
One of the original YouTube videos to go massively viral, heralding the YouTube age, was sold as an NFT for more than $760k in May 2021. It was then swiftly unlisted after the change in ownership, after 14 years on the app!
A quick disclaimer. I work at Google, but am not affiliated with YouTube in anyway. I have no insider knowledge about that sale or about YouTube’s future plans for web3. I for sure wouldn’t share it here if I did. What follows are my personal opinions.
YouTube likely didn’t get anything out of this transaction. There are a lot more such viral user-generated content (UGC) on YouTube and other video-sharing apps (VSA). Their creators too are no doubt looking at this new avenue for monetizing their content and trying their luck in cashing out with a large sum rather than rely on an unpredictable stream of shared advertising revenue.
If this caught on among content creators, and content kept disappearing following off-platform sale, that wouldn’t be great for anyone. VSAs would stand to lose the very content that is their USP, compared to the likes of Amazon Prime or Netflix, besides losing all future advertising revenue from the content. Users will lose out on great original content that is not available elsewhere. Creators too would suffer in the long run with the erosion of the UGC ecosystem.
VSAs have a special responsibility and interest in preventing this outcome. However, it’d be foolish for them to fight this trend, and much wiser to try and find a way to make it work to their advantage. Hence this new role at YouTube. I expect to see a flurry of similar roles cropping up in other video-sharing companies.
So how could a VSA cash in on web3?
They would need to build functionality to allow creators to sell the ownership of content as an NFT on a public blockchain, directly on-platform, for a cut of any eventual sale. The app should simplify this process for the creator by minting an NFT, publish it on third-party NFT marketplaces such as OpenSea and promote it on-platform.
Listing as an NFT would enable access to a much larger set of buyers than a proprietary listing would have, since NFTs can be easily cross-listed on any NFT marketplace that supports that blockchain. Even with third-party cross-listing, VSAs would have an enormous edge over those marketplaces in making the sale because they already have the content, making it more likely for the creator to publish it using their platform, and also because they can price and promote the content much better by analyzing the viewership and advertising data.
However, just building this functionality isn’t enough. Many creators could still choose to mint and list their video NFTs on third party marketplaces themselves to not have to share of the cut of the sale to VSA. There would be no dearth of tools to do it easily. VSAs wouldn’t have offer any advantage in ease of minting and listing.
To avoid such a scenario, VSAs could require the creators to require using their app for minting and listing, if the creator wanted to have their content available for viewing on the VSAs platform.
This would be a win-win for the creator and the VSA. The VSA would be able to price and promote the content much better than an individual creator or third party tool without access to viewership or advertising data can. Views of their content on the VSA platform would make the content more attractive for sale, and would allow it to monetized until the eventual sale. Therefore, most creators should be amenable to such an agreement.
If such monetization through NFT auction were to become a significant revenue driver for VSAs, it would open up exciting possibilities for smaller and upcoming VSAs.
Firstly, this would make the field a bit more level for them by allowing them to leverage the distribution of larger external marketplaces to seek higher monetization than their own distribution would have otherwise allowed.
Secondly, they’d be able to bid on content already hosted by other VSAs through open marketplaces. This would make niche VSAs feasible by allowing them to purchase long-tail content related to their niche from more established competitors. It would become possible to disrupt incumbents by using better analytics for determining video pricing.
In summary, enabling NFT marketplaces for their user-generated content could make video-sharing apps more profitable, incentivize creators by unlocking the earning potential of their videos, and also promote competition in the space.