Uncanny – there we are toiling deep in the bowels of our research on the Online Video market, when up pops this post on NewTeeVee asking “where is the money”? Where indeed. The article shows a very useful summary of all the forecasts made by various parties (from e-Marketer), which I have put below:

Online Video Advertising – compound projections from e-Marketer

Now considering that the US is probably 50% plus of the global market right now, that means this is a drop in the ocean for online (c $50bn) and for TV advertising (c $70bn). By our calculations, Google has paid pretty much the entire US current revenue stream from start to 2009 for YouTube! And e-Marketer has already halved projections to 2012 once……

Now hold on, I hear you say – YouTube advertises on only 4% of its inventory, so we know the market is far bigger, and our Wise Teachers tell us that Attention = Money!

Well, it turns out that Attention and Money are not quite the same thing, or at least are unevenly distributed. Attention by rich people to high quality video garners Ad money, attention to low quality stuff by oiks does not:

….advertisers are becoming comfortable with a new kind of inventory — made-for-the-web content with high production values — and also with so-called professional content that is made for a lower budget so as to fit in better online.

But should advertisers accept UGC, it would open the floodgates for online inventory, which would surely come at a lower price.

So who is paying for it all?

Who indeed – apart from the Ads, its also partly funded by Other People’s Money (VC’s etc), and also partly funded by Google (subsidising YouTube) and others doing similar.

But most of the subsidy at present, we submit, is from YOU – the Users Generating the content (or increasingly frequently, copying the content). It was Clay Shirky who recently pointed out that millions of hours of free time were being given, for free, to creating free content (for others to then aggregate and sell to the highest bidder – which Nick Carr noted was really Digital Sharecropping). Even the porn video industry is suffering from YOUR user de-generate content.

The user is paying for receiver-side kit (even paying a premium for Apple gear) and fat pipes, but apart from the occasional trade sale (YouTube, Wallstrip etc) the whole content creation/aggregation sector relies on 3rd party funding. In fact, apart from these Ad revenue numbers, the whole supply side is in deficit right now

Which of course begs the question – what event would make people stop funding this deficit, or instead carry on funding it? What do you have to believe for these scenarios to take place? Would all funding stop, or just the bits that don’t make money today?

Well, we’re working on that as I write, and judging by this post I assume its in the zeitgeist and many others are too……