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YouTube Investment in VEVO Would Strengthen its Top Position in Online Video Rankings

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Peter Kafka of AllThingsD reported last night that “YouTube and its owner Google have agreed to buy a minority stake in VEVO, according to people familiar with the deal, which hasn’t been finalized.”

The deal would strengthen YouTube’s top position in the online video rankings. It would also represent a new phase in an already complex relationship.

Earlier this week, the comScore Video Metrix service released data showing that 182 million U.S. Internet users watched 38.7 billion online content videos in December 2012, while video ad views totaled 11.3 billion.

Google sites, driven primarily by video viewing at YouTube, ranked as the top online video content property that month with 153 million unique viewers, followed by Facebook with 58.8 million, VEVO with 51.6 million, NDN with 49.9 million and Yahoo sites with 47.5 million. Nearly 38.7 billion video content views occurred during the month, with Google sites generating the highest number at 13.2 billion, followed by AOL, Inc. with 692 million.

The December 2012 YouTube partner data also revealed that video music channel VEVO maintained the top position in the ranking with 50.5 million viewers. Fullscreen climbed into the second position for the first time with 31.1 million viewers, followed by Maker Studios Inc. with 30 million, Warner Music with 26 million and Machinima with 26 million.

Among the top 10 YouTube partners, Machinima demonstrated the highest engagement (68 minutes per viewer) followed by Maker Studios (44 minutes per viewer). VEVO streamed the greatest number of videos (565 million), followed by Machinima (503 million).

So, as the charts above indicate, VEVO is both the number 3 video content property by unique viewers and the number 1 YouTube Partner Channel by unique viewers. So, VEVO is both a YouTube competitor and a YouTube Partner – a classic example of a “frenemy.”

frenemy

This complex relationship began in April 2009, when Universal Music Group (UMG) and YouTube announced that they were working together to launch VEVO. The two companies also announced they would share advertising revenue on YouTube and VEVO.

In June 2009, Sony Music Entertainment (SME) joined the forces creating VEVO. In October 2009, VEVO received a strategic investment from Abu Dhabi Media Company (ADMC). And in December 2009, EMI Music licensed its content to the group without taking an ownership stake.

On December 8, 2009, VEVO was unveiled at an event at New York City’s Skylight Studios, which featured a star-studded line-up that included Bono, Mariah Carey, Ciara, Ke$ha, John Mayer, Corinne Bailey Rae, Rihanna, Taylor Swift, Shania Twain, and many others. The evening ended with exclusive live performances by Lady Gaga and Adam Lambert. Guests were also treated to the world premieres of new videos by 50 Cent and Mariah Carey.

Powered by YouTube, VEVO became the most visited US web network in the Entertainment-Music category in its first month of existence with 35.4 million unique visitors, according to comScore.

The concept for VEVO has been described as being a Hulu for music videos, with the goal of attracting high-end advertisers. But VEVO has something that Hulu doesn’t — VEVO’s music videos are integrated into YouTube’s music category. This means “Baby - Justin Bieber ft. Ludacris” is not only the most viewed video of all time on VEVO with 822,071,372 views, it is also the second most viewed video of all time on YouTube, behind “PSY - GANGNAM STYLE (강남스타일) M/V.”

This brings us to a third set of data announced by comScore earlier this week. Americans viewed 11.3 billion video ads in December 2012, with Google sites ranking first with nearly 2 billion ads. BrightRoll Video Network came in second with 1.8 billion, followed by Liverail.com with 1.8 billion, Adap.tv with 1.5 billion and Hulu with 1.5 billion.

Time spent watching video ads totaled 4.1 billion minutes, with BrightRoll Video Network delivering the highest duration of video ads at 966 million minutes. Video ads reached 53 percent of the total U.S. population an average of 70 times during the month. Hulu delivered the highest frequency of video ads to its viewers with an average of 65, while Google sites delivered an average of 20 ads per viewer.

So, despite hints over the past year that VEVO might strike alternative distribution deals with Facebook or Viacom’s MTV, YouTube remains the biggest and best “frenemy” available to drive ad revenue. This explains why “under both the old deal and the new one the company is set to strike, VEVO hands over about a third of its revenue to YouTube,” according to Kafka.


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