YouTube still has one big advantage over Facebook (NASDAQ:FB) when it comes to attracting top-quality video content: monetization. The Google (NASDAQ:GOOG) (NASDAQ:GOOGL) service generates and pays out billions of dollars to its content creators every year. Facebook, meanwhile, does not offer any revenue-sharing options for publishers posting videos in user News Feeds.
Despite the growing popularity of Facebook videos, the company must find a way to monetize the platform and share revenue with creators in order to attract the most popular content. Offering multiple monetization paths aside from advertising could help it draw more creators to its video platform. Its latest acquisition, Tugboat Yards, could be a solution to that problem. The small start-up helps publishers accept payments from viewers and readers.
Get paid what you're worth
The YouTube advertising revenue sharing program is fairly agnostic. YouTube pays per ad view, regardless of the content it is advertising against. Outside of a select few content partners, a view is a view, and the revenue split is laid out clearly. While some ads are more targeted and receive a premium, many of the most popular YouTube videos are general entertainment, and targeting is no better than broadcast television. As a result, a video of your pet cat receives roughly the same amount of revenue per view as a professionally produced comedy short.
That is not to say users are complaining, but there is no way for a popular YouTube channel to monetize its viewership more effectively than a one-off viral hit. Tugboat Yards helps content creators offer something more to users for a small donation. In other words, if viewers appreciate the content and want more, they can pay the creators directly.
Tugboat Yards also enables bloggers, video producers, and other content creators to offer special products and services to fans in exchange for payment. For example, YouTube video makers could put some content behind a paywall using Tugboat. In the past, Tugboat has worked with content creators to produce things like premium newsletter services, ebooks, magazines, and even one-on-one wine classes.
Facebook, meanwhile, is slowly building up its own payments platform. It introduced payments for Messenger earlier this year and has experimented with a buy button in the past. It also has a bunch of credit cards on file, collected during the golden days of FarmVille. Integrating Tugboat with Facebook video and payments data could help the social network and its content providers monetize videos by using the Tugboat business model. Facebook also offers a huge distribution network to promote premium videos and other products.
The social network is also making incremental upgrades to its video interface. The company has experimented with suggested videos and autoplay in the past. Placing premium content in the suggested videos area with a small paywall (pennies not dollars) could help the company attract the best content producers.
Not just for video
Earlier this month, Facebook also introduced its Instant Articles service, which takes publisher content and hosts it on Facebook servers to help articles load faster. This could be a risky proposition for publishers such as National Geographic to cede control of content.
Several Instant Articles partners sell premium subscription services, which is exactly where Tugboat specializes. More importantly, it could open the doors for Facebook to expand Instant Articles to smaller online publishers that want to reach a wide audience but would prefer not to inundate that audience with advertisements.
There is a growing demand for an ad-free online experience. Google has even experimented with removing advertisements on its partner websites in exchange for a monthly fee that it shares with publishers. Using the Tugboat model, Facebook could give both publishers and readers what they want.
Eating the Internet
With videos and Instant Articles, Facebook is working to keep users on its platform longer. Attracting quality content producers is key to succeeding in the space, and offering multiple monetization paths is key to attracting content producers. The new Tugboat Yards acquisition, and the hiring of Tugboat CEO Andrew Anker, should help Facebook in that regard.
Anker "will be joining the Facebook product team to work on media products such as news and video," according to his announcement on the Tugboat Yards blog. Facebook will enable Anker to extend his business to almost every publisher on the Internet.
YouTube, of course, is not going to lie down and let Facebook run away with its partners. The service is producing its own original content and offering lucrative deals to some of its top performers. Facebook has reportedly offered similar deals to content producers, but that is only sustainable if the company can monetize videos effectively. Tugboat Yards offers a viable solution.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.