(Exclusive) YouTube's New Strategy: Create a Network Of Networks

YouTube is now showing approximately 3 billion videos a day. A growing proportion of those are shown with ads—more than 2 billion a week—and YouTube as a business is expected to pass $1 billion in revenue next year.

But when it comes to making money, some videos do better than others. Professionally-produce videos attract the most ad dollars. These include videos from TV networks and major media companies, which is the low-hanging fruit, but also increasingly from Web-only video networks and studios such as Blip.tv, Maker Studios, and Revision3. A big part of YouTube’s strategy is to encourage and promote these native Web networks. It bought one of the biggest ones, Next New Networks, and that team is now training other video producers how to replicate their results.

For YouTube, it is all about scale, and networks of loosely aligned online video producers scale better than individual shows and viral-video phenoms. In fact, there is a brand new department inside YouTube called Networks. The purpose of the department is to encourage the formation of these outside networks which then use YouTube as their distribution channel. (Update: YouTube denies the existence of this department, see below).

YouTube can then help sell advertising targeted at these more professional networks of Web series and shows, and that scales better than supporting individual YouTube producers. YouTube will keep doing that, of course, but you can see the beginnings of an organization that will help to further professionalize the Web video industry.

In this view, each network is like a channel, and YouTube is the new cable system or MSO (multiple system operator). The ABCs and Food Networks are welcome on YouTube, but Networks is very much an attempt to grow native channels on the Web. If YouTube gives them enough support and makes it profitable enough for the Web-only networks, they in turn will be able to pay more for native Web shows and series, and one day the best talent might even skip TV altogether. But first, baby steps.

Update: YouTube denies there is any new strategy or organization focused on Networks. A spokesperson says: “There are many networks doing great things on the YouTube platform, but there is no group inside YouTube called Networks.” Whether or not it is a formal department, executives in the online video industry refer to it as “YouTube Networks” and perceive a shift in strategy. That may turn out to be wishful thinking, although there is at least one YouTube manager overseeing these relationships.