YouTube is discovering that they have nothing they can sell enough of to make money on free video - the only thing that truly has value is the video itself. Yet, youtube and all the tube style sites out there have spent the last few years teaching people that video is worthless, mindless free entertainment that shouldn't be hindered by anything, not even the traditional advertising model that broadcast TV has used for years (and that many websites including CNN use very well to their benefit).
http://www.wired.com/techbiz/it/maga...urrentPage=all
The stupidity of free - why it sounds like a great business model unless you are the person producing what has been given away for free. It's an amusing story (and certainly one that will be changed by the time it makes it to print in July). The entire "free" marketing campaign always assumes that enough people will buy whatever you are pushing to make all the freeness worth while.
Where does it fall down? Bands give away music to sell concert tickets. What would happen if some bands started to do free concerts in order to sell t-shirts and other merchandise? Next some bands start doing free concerts and giving away t-shirts to sell, I dunno, cars. Each step of the process, the object of value (CDs, concerts, T-shirts) is dropped in the mind of consumer to that value of zero, which makes it very difficult in the future to re-establish actual value.
Youtube (and many of the Web2.0 properties out there) are hitting the wall now. Some of them were heading towards potential profitablility based mostly around online ad sales, but the recession is pushing that off to long into the future. While traffic is king, the reality is that traffic without income is a drain, nothing more.
(As a side note, Facebook turned 5 recently, and there is little or no chance that they will find a way to profitablilty any time soon. They have only kept going basically by selling a small part of the company to Microsoft for a hyped up valuation that they were not able to justify in a court of law).