



Last week, the internet was flooded with stories of YouTube and Web 2.0’s impending doom. All of this talk of the web-pocalypse was set off by a report released by Credit Suisse, a financial-services company, which claimed that Google, the company that owns YouTube, is set to lose almost $470 million on the site this year. The culprits: high server costs and low ad revenue.



While it’s understandable that advertisers don’t like paying much for user generated content, it's pretty sad that Google's losing money on YouTube. YouTube has a built in audience of more than a billion people. If advertisers and Google can’t find a way to make the situation, where they get almost exact data on the size and location of their audience, profitable, then they deserve to fail. ABC doesn’t have problems selling ads for America’s Funniest Home Videos, why should YouTube be any different?



The bottom line is that advertisers have grossly failed the internet. Billions of people go online daily, spending hours on sites like YouTube, Flickr, and Facebook, and advertisers have failed to provide relevant ads to this engaged (and addicted) audience. Eric Clemons, Professor of Operations and Information Management at the Wharton School of the University of Pennsylvania, argues that, “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed.” The message is flawed, not because we don’t trust it, but because it’s poorly conceived, packaged, and often delivered to the wrong address.



Most of the ads we see on the internet are trashy click-ads for sleazy looking products or services that make outrageous claims like “get rich blogging,” “lose forty pounds in a week,” or “get an eight inch penis.” Click-ads like these aren’t very effective. Sites need to start rolling out contextually significant ads (Google is already working on something like this). So far, gaming sites have been adept at this by focusing on ads about games (shocking). Providing contextual ads on YouTube is a little harder, but there’s probably a skateboarding company out there that would love to advertise its logo beside a well-trafficked video of some skateboarder wiping out and getting hit in the crotch.