“It’s difficult for Google,” says Wharton marketing professor Patricia Williams. Traditional media companies “have models that have evolved to be inefficient.” For example, a single snippet of video content — such as a commercial — most likely has multiple parties looking for compensation. An actor in a television commercial may get paid every time it runs, and the ad agency could also be remunerated based on the number of times the commercial is aired. What happens if that same commercial is uploaded and played on YouTube? Williams says the challenge for Google is finding a way to compensate all the various players in the traditional media food chain.
Wharton marketing professor Peter Fader attributes Google’s YouTube troubles to missed opportunities. Last fall, Google announced the $1.65 billion acquisition of YouTube and a series of business development deals with content providers like CBS. However, according to Fader, Google has failed to do much with the partnerships since. “I think Google was handed a golden opportunity with YouTube,” he notes. Indeed, “content providers and Google seemed to get along” in the beginning. “It’s hard to say why they can’t get along now.”