Why YouTube Is Ready for Prime Time

Before long, the dumb but amusing karaoke klutzes that started the ball rolling for YouTube were surrounded and supplanted by content that was fairly compelling, as long as your standards were blunted by years of bad commercial TV. And if you want, you can also see my one-minute vacation video, or dozens of card tricks, or instructions and examples on wakeboarding tricks.

Tale of the Tail

YouTube has become a shining example of what former Wired editor Chris Anderson calls "the long tail." His theory is basically that until broadband came along, mass-media organizations like the broadcast networks would make money by creating a small amount of high-quality content that would appeal to 75% of advertisers' potential audience. The "long tail" is the tens of thousands of pieces of content that have a very small potential audience but can make an equivalent pile of money for a producer because there is virtually no cost to providing it.

Kedrosky believes that YouTube can become profitable very quickly simply by inserting five- to 15-second ad snippets before and after those millions of videos. Calculating that they provide 8 million to 12 million streams of video a day, he figures they could earn up to $20 million in annual videos in a heartbeat.

Since the only material cost at YouTube is its astounding 200 terabytes of traffic a day -- the company staff is said to be fewer than 30 people -- that much money would erase the operating deficit and lay the groundwork for substantial profitability.