YouTube headed upscale at GuggenheimBy Douglas MacMillan
YouTube will fill the cylindrical atrium of New York's Guggenheim Museum with video installations that may feature anthropomorphic sneakers, avatars from virtual world Second Life and a woman turning into an animated crow.
The exhibition, set for October, will showcase videos from as many as 20 finalists of YouTube Play, a contest for graphic artists and users of the Google-owned video site. A celebrity jury that includes Japanese pop artist Takashi Murakami and "The Wrestler" director Darren Aronofsky will wade through about 200 videos whittled down from thousands submitted in July.
Google's dalliance with the fine arts is part of a broader initiative to attract top advertisers and a wider variety of users to YouTube, based in San Bruno. The world's largest video site, which Google bought in 2006 for $1.65 billion, is still synonymous with clips of babies and other amateur fare. Teaming with a premier art institution and rewarding contemporary artists may help make YouTube's brand more upscale, analysts said.
"Having content associated with the Guggenheim draws in a different kind of demographic than kids crashing their skateboards," said Bill Niemeyer, senior analyst with the Diffusion Group, a Frisco, Texas-based digital media analyst group. "It also produces a halo effect for them with decision makers at agencies and advertisers."
Making YouTube into more than a money-losing side project could help Mountain View's Google reduce its dependence on search-related ads. Such ads account for most of Google's sales, though in recent years, growth has been slowing.
Sales of ads shown in online videos are expected to increase to $1.51 billion in 2010, up 48 percent from last year, according to market tracker eMarketer Inc. Mark Mahaney, an analyst at Citigroup Inc. in San Francisco, estimates that YouTube will account for $614 million of Google's net revenue this year. The unit should turn a profit by year-end, he said in an interview. Google doesn't disclose YouTube's sales.
The number of advertisers buying all types of ads on YouTube grew 50 percent in the past year, according to Google. Those buying graphical display ads increased 10-fold. Prominent marketers this year included General Electric Co. and Nike Inc.
YouTube is luring more advertisers and expanding sales even as competition for Web video heats up. It ranks fifth in total video ads viewed, behind Hulu Inc., video ad distributors Tremor Media Inc. and BrightRoll Inc., and Microsoft Corp., according to comScore Inc. The 219 million video ads on Google in July were less than a third of Hulu's 783 million. Hulu is talking to investment banks about an initial public offering, a person with knowledge of the plan said last week.
The Guggenheim exhibit is an opportunity for Google to show that YouTube has cachet beyond the confines of the Web, said Tracey Scheppach, a senior vice president and video innovations director at Starcom MediaVest Group, a media buying and communications company owned by Paris-based Publicis Groupe SA that has worked with Google. "They are trying to fit into the culture of where premium advertisers live."
Still, YouTube lags behind Hulu and Los Gatos' Netflix Inc. in offering the most attractive content in the eyes of most viewers and advertisers: new TV shows and movies, said David Hallerman, a senior analyst at eMarketer in New York. Some of the most popular shows on Hulu, such as "Family Guy," "The Office" and "The Daily Show," aren't available on YouTube.
"Most of the traffic is not on a higher cultural plane, it's more mass cultural - so that's where the greater ad dollars will come," said Hallerman.
YouTube has added professionally produced video to the site including shows from World Wrestling Entertainment Inc. and Spanish-language broadcaster Univision Communications Inc.v7
Copyright ©2010 Bloomberg Businessweek. Published 08/24/2010.