YouTube Kills

I'm not much for conspiracy theories, but am I the only one who thinks YouTube is trying to quash the Lonelygirl15 phenomenon before it graduates into a hit on other platforms?

Follow me here. Earlier this month, the Lonelygirl15 universe was outed as an orchestrated storytelling stunt. As YouTube's star attraction, the quirky 16-year-old Bree and her best bud Danielbeast captivated viewers through more than 30 video log entries.

Last week, the producers behind the online serial came clean. The concept was conceived at a party by three aspiring filmmakers. Bree is actually a 19-year-old actress named Jessica Rose. After her cover was blown, she went on to appear on everything from MTV to a guest-star stint on Jay Leno's Tonight show.

The press ate it up, and that included a media shoot with Jessica Rose ... with Revver.com's logo in the background. Revver is a small YouTube competitor that has been trying to differentiate itself as a site that will share ad revenue with those who upload legally owned clips.

When you're a traffic magnet like Lonelygirl15, with each video generating hundreds of thousands of views, the incentive to cash in and get a piece of the action is human nature. Lonelygirl15 was bound to outgrow its viral video roots eventually, which explains why she now has a page on News Corp.'s (NYSE: NWS  ) MySpace.com, and is now uploading new videos on Revver and Lonelygirl15.com along with YouTube.

Was YouTube going to take this defection lying down?

When YouTube attacks
The latest installment in the Lonelygirl15 series should have been an epic moment in the "clip culture" revolution. After dozens of videos that were teasing the obvious, Bree and Danielbeast had their first kiss.

This should have been the proverbial "shot heard around the Web," but something happened. Shortly after the video went up on YouTube, the views counter on the clip froze at 1334. That temporarily kept the video from being listed on the "Most Viewed" list, where many visitors start their site-surfing experience, and naturally, YouTube wasn't going to tag Benedict Bree's latest entry as an editorially selected featured clip.

The counter was ultimately fixed. The video has already been streamed well over half a million times on YouTube. However, the rift between YouTube and one of its most popular attractions is evident.

It's a shame; the two had something good going until the shortcomings of one started to expose the shortcomings of the other.

The problem with YouTube
It's not easy being YouTube. Even as many investors hope to see an IPO before a larger dot-com portal buys it outright, streaming videos isn't cheap. By some estimates, YouTube is spending a cool million bucks every month just for the bandwidth involved in delivering the streams.

The popularity of Internet video has fueled a market winner in speedy enabler Akamai (Nasdaq: AKAM  ) , but we don't know how well this medium will perform for the video sites themselves. The big boys keep piling in anyway, if only to see whether they can lure away some of the eyeballs that YouTube and MySpace are stealing from their own portals.

This week, Microsoft (Nasdaq: MSFT  ) announced that it's jumping into the fray with a private beta of its Soapbox on MSN Video. This follows earlier efforts by Yahoo! (Nasdaq: YHOO  ) , Time Warner's (NYSE: TWX  ) AOL, and Google (Nasdaq: GOOG  ) to matter in the viral video platform that the Internet has evolved into lately.

They are trying to get their foot in the door because it's the place to be, but the economic models may not hold up. The problem isn't just costly streaming overhead and few opportunities to push ad space without alienating visitors. Because a lot of the stuff being uploaded imposes on the copyrighted works of television shows, record labels, and Hollywood films, the old-school content makers are starting to get litigious.

YouTube was able to broker a deal with Warner Music Group (NYSE: WMG  ) in which the label would get paid when its artists are being infringed on, and similar deals are likely across the board. It sounds harmonious, but in the end it will only mean more mouths to feed.

YouTube will have to evolve and paddle new streams. DVDs and viral video festivals are logical extensions of the existing model, but it should also go out of its way to secure the stars that the site has been creating.

Around for less than two years, YouTube has already launched the music of OK Go to a mainstream audience. Along the way, everyday people -- like the nostalgic but seasoned geriatric1927 or Renetto, with his firm grasp of YouTube's place in pop culture -- have become cyberspace celebrities.

Lonelygirl15 isn't the only scripted serial to be catapulted into stardom on the site. The comical Hope Is Emo has also garnered a sizeable audience, and you can bet that every aspiring filmmaker is trying to catch lightning in a bottle and duplicate the success of Lonelygirl15.

YouTube needs to do a better job of reaching out to its stars, possibly even taking on more mouths to feed with revenue-sharing deals if they agree to keep their presence exclusive to the site. If not, sooner or later, one of the major portals with billions in the bank is going to get it right.

The Problem With Lonelygirl15
It's not just YouTube that has everything to lose here. Now that the media circus is starting to move on, the Lonelygirl15 franchise has to evolve into something grander or it will be exposed as a mediocre production that just got lucky and forgotten by Thanksgiving.

Now that the team has spilled the beans, it can't go back to where it was. Just look at the venomous comments and spitefully low ratings being dispensed by the original fan base, who couldn't have seriously thought that these slickly produced clips were amateur shoots, even though, deep down, they probably hoped that they were.

This newfound freedom for the creators comes at a time when the Warholian window of opportunity is starting to close -- unless they can smash a permanent hole in the pane by flexing their creative abilities.

It isn't as hard as you think, really. Here's a potential three-step plan to keep the brand going.

  • Unless the producers already have plans for delicious plot twists with a satisfying -- or at least unforgettable -- resolution at the end, let the audience take over. Institute polling features and let viewers dictate the direction to take the story at key forks in the storytelling road.
  • Indie music has been a major feature of the Lonelygirl15 series, so rally the citizenry by having artists submit music and take the track-selection process public. There may or may not be a DVD product out of Lonelygirl15, but there can definitely be room for a CD soundtrack.
  • Embrace the wide range of expectations. Some folks want to see the love story blossom. Some want to see a darker bent emerge. Others want to see the unauthorized Cassie Is Watching scavenger hunt for clues evolve into more interactive sleuthing. You can do it all, as long as you are able to spin off the fringe elements while making sure the edgy detours still intersect with the main story down the line.

It's not too late for YouTube or Lonelygirl15, but both companies have the same problem: protecting their turf in a landscape that is perpetually changing.

Akamai is aRule Breakersstock pick. Microsoft is anInside Valuenewsletter service recommendation. Yahoo! and Time Warner areMotley Fool Stock Advisorselections.

Longtime Fool contributor Rick Munarriz knows that you can't ignore sleeping giants, much less the ones that are wide awake like YouTube and MySpace. He does not own shares in any of the companies in this story. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Foolhas a disclosure policy.


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