Rebooting YouTube

Rebooting YouTube

Susan Wojcicki built Google into a $55 billion advertising giant. Now she’s running YouTube. Her job: Do it again.

When Susan Wojcicki took over YouTube in February, she received almost as much unsolicited advice as there are YouTube videos. One open letter not-so-subtly pleaded with Wojcicki, “So please, I’m begging you, please, please, please, don’t f*** it up.”

“There were lots of letters, public letters,” says Wojcicki when we meet in her office in mid-June at YouTube’s San Bruno, California, headquarters. “‘Open Letter to Susan Wojcicki.’ ‘Do These Five Things.’ There were videos from creators.” Even her family got in on the act. “My mom is a high school teacher, so she would tell me, ‘Oh, the students liked the video you posted today. Oh, the students didn’t like the video that you posted today.’ As though I, personally, posted a video!” she says, laughing.

Her four kids gave her a YouTube crash course. “I was just starting to get to know a lot of these videos, and they’d be like, ‘Oh, no, Mom. That video came out like six months ago.’ And then they would go on about the whole backstory of this content and this creator. I didn’t know how much time they were spending watching YouTube.”

The ambush of advice was, she admits in her amiable way, “a little overwhelming.” Wojcicki, 46, is a consummate insider­–she’s Google employee No. 16–and a publicity deflector who isn’t used to being in direct communication with a fan base as vocal and passionate as YouTube’s. “She doesn’t optimize for, ‘Hey, I did something that would be a great article, I did this amazing thing,'” says Twitter CEO Dick Costolo, who worked with Wojcicki after Google acquired his startup Feedburner in 2007. “On the surface, you might not see her as the archetype for a leader because she’s so nice,” adds AOL chairman and CEO Tim Armstrong, who also worked with Wojcicki at Google. “But underneath it, she’s a real fierce competitor.” Costolo calls her “the most understated operations executive in the Valley.”

Her skills as a leader and operator are going to be tested at YouTube like they never were during her 15-year career at Google. Although YouTube is one of the most important brands at Google, “there’s a perception that YouTube is punching below its weight,” says Ynon Kreiz, CEO of Maker Studios, one of the leading management-production companies that work with YouTube creators to help them be more professional and make more money. “I assume even Google and YouTube believe it can monetize better. This is something Susan is very focused on.”

Analysts estimate YouTube’s 2013 revenue at $5.6 billion. (Google does not break out YouTube’s revenue in its financial filings.) Facebook, the other Internet phenomenon with more than 1 billion users worldwide, brought in more than $7 billion in 2013, almost half from mobile advertising. Indeed, Facebook has been far more swift and nimble than YouTube in migrating both its audience and its business to phones, which is reflected in its $170 billion market cap. YouTube, by contrast, is valued at only $15 billion to $20 billion.

Complicating matters, Wojcicki joined YouTube amid a rising chorus of concern that creators cannot make a living producing content for the video site. The complaints: that YouTube takes a hefty 45% of revenue from ads that run with videos; and that there is such a glut of content–YouTube brags that 100 hours of video are uploaded to the site per minute–that it depresses ad rates and inhibits even the most popular creators from selling out their inventory.

The growing discontent came to a head in August 2013 at VidCon (both the digital video industry’s confab and the YouTube universe’s Comic Con), when entrepreneur and angel investor Jason Calacanis delivered a keynote address saying that YouTube’s tariff didn’t allow creators to make high-quality videos, and urged attendees to protest. Almost a year later, Calacanis’s stance hasn’t changed. “I don’t think it’s gotten better for creators yet,” he tells me in an email. “Currently, 99.999% of creators are not going to make a sustainable living on YouTube.”

With both creators and their management feeling disrespected and restless, bigfoot competitors such as Amazon, Disney, Facebook, Twitter, and Yahoo are circling. If YouTube can’t translate its longtime dominance of online video into converting the $212 billion global TV advertising market to digital, its would-be rivals figure that maybe they can.

To fend off the encroaching opposition, Wojcicki has to align the interests of Hollywood, Madison Avenue, and Silicon Valley–all of which play important roles in the increasingly complicated YouTube ecosystem. At the same time, she may also have the most daunting job at Google. Inside the advertising giant, the perennial question is, Where is the next $10 billion in revenue coming from? Right now all eyes are on Wojcicki.

Wojcicki’s Google career can be summed up by two superlatives that have been applied to her: The Most Important Person in Advertising and The Most Important Googler You’ve Never Heard Of. If you know anything about Wojcicki, it’s that Google was founded in her garage, which she rented to Sergey Brin and Larry Page when they were fresh out of Stanford and noodling around with turning their graduate project into a business. “I feel like I saw when it was born,” she says.

Wojcicki did a lot more than just watch. She’s one of the architects of AdSense, the revolutionary system that allows websites and blogs to make money on their sites by displaying Google ads. As Costolo says, “She’s pretty much responsible for Google’s revenue engine.” Google generated $55.5 billion last year. Wojcicki also championed Google buying YouTube in 2006, though when she tells the story, she’s not bragging. “I saw some of their numbers and I just realized how much bigger they were than we were”–Wojcicki ran the rival Google Video at the time–“and even if it doesn’t look good for you at that moment, you have to make the decision that it’s not really about you but what’s the right long-term thing for the company.”

When Wojcicki says, “I’ve been, like, the mom of Google,” she means it literally and figuratively. She was the first employee to have kids, and she’s played a key role in nurturing Google into corporate maturity. She talks about her children and several Google milestones with the breezy cheer of a proud parent.

As she sits in her candy-colored red-and-white office wearing skinny jeans and a Google T-shirt partially covered by a loose sweater, a huge roomful of millennials right outside, Wojcicki makes clear that now it’s YouTube’s turn. “YouTube is growing up, is basically my view of it,” she says. “Growing up means our creators are growing up, they’re getting more well known. We’re providing programs for them to generate more revenue so they can generate even better, high-quality shows, and then also connecting them with the advertisers.”

Wojcicki’s approach has been a sharp departure from that of her predecessor, Salar Kamangar. An introverted techie, Kamangar, Google employee No. 9, preferred to stay behind the scenes, delegating to lieutenants such as Shishir Mehrotra, who ran product and monetization, and Robert Kyncl, YouTube’s liaison to the Hollywood community. According to several sources, YouTube management seemed closed off and imperious–to both talent and the production companies that arose to manage them, known as multi-channel networks, or MCNs. “Every MCN’s view under the Salar and Shishir leadership was that they were indifferent to our existence and, if anything, saw us as somebody who would eventually need to go away,” says Mark Suster of Upfront Ventures, which has a stake in Maker Studios. A former executive at a YouTube network puts it this way: “YouTube reeked of Google arrogance. It was a definitive disposition that ‘We know best.’ ”

In contrast, Wojcicki flew to Los Angeles within her first month on the job for several days of fence-mending meetings with the YouTube networks, VCs, and individual creators. She mainly took notes and listened, and her attitude went a long way toward telegraphing that YouTube would have a new management style. Suster says Wojcicki’s visit “was the first time anyone [from YouTube headquarters] had ever reached out directly to me.” Adds

Sarah Penna, cofounder of Big Frame, which represents YouTube stars like Sawyer Hartman, “They tend to keep us in the loop on major product changes a lot sooner.”

Wojcicki’s interest in creators–whom she calls the “lifeblood of YouTube”–seems to stem from taking a real joy in them. When Wojcicki visited AwesomenessTV, the DreamWorks-owned digital studio in L.A., she caught sight of YouTube personalities Niki and Gabi and asked if she could take a picture with them. “Not only did she take the picture, then she tweeted it,” says Brian Robbins, Awesomeness’s CEO. “I was like, okay, she’s a little bit of a groupie. That’s a good thing.”

Robbins calls Kamangar a “really cool, smart guy,” but says that Wojcicki has impressed him in a different way. “I just felt like she really understood what we’re trying to do. It’s about content and talent, not just an algorithm.”

In just a few months, these gestures have crucially changed the feeling among content creators and their backers to one of cautious optimism. But make no mistake–underneath Wojcicki’s fangirl friendliness is someone “who really drives toward outcomes,” says AOL’s Armstrong. Mom may be supportive and empathetic, but she’s no pushover. Wojcicki has centralized authority in her office, prompting a wave of executive turnover. And even as she makes nice with creatives, she’s not budging on YouTube’s share of the ad revenue. She has other ideas for how to make them happy.

“Oh, this is from my line,” Bethany Mota says, delicately touching the floral minidress that she’s wearing one warm day in June. Her clothing and accessories collection with the youth fashion retailer Aéropostale is one of the ways Mota has leveraged her fame on YouTube, where her weekly videos featuring whatever makeup and clothing she’s wearing (“What I’ve Been Loving!”) have attracted almost 6.5 million subscribers and nearly 500 million views.

At 18, Mota is a YouTube veteran. She began uploading videos when she was 13 and “kind of bored.” She adds: “I was also being bullied at the time, so I kind of didn’t really want to do anything. I just wanted to stay inside.”

In person, Mota, who hails from Pleasanton, California, is a cute and cheery girl. But put her in front of the camera or an audience, and she’s a star with a rare gift for forging a kinetic connection with fans. Suddenly, her smile seems a mile wide and her bubbly energy becomes contagious. “Teens want to relate, engage, and connect to what is real, and Bethany projects that,” says Emilia Fabricant, EVP of Aéropostale Brands, explaining why she signed Mota.

Mota embodies phase one of Wojcicki’s push to grow YouTube: Promote advertiser-friendly stars who can draw more attention–and dollars–back to YouTube. The company’s lack of promotion, both on and off the site, has been a consistent complaint among YouTubers, and it’s something Wojcicki is addressing aggressively. During a presentation to advertisers this past April in New York, she unveiled what’s internally known as Beacon: a campaign to promote the bejesus out of a select group of brand-ready YouTube stars. Mota, along with makeup artist Michelle Phan (6.5 million subscribers) and nerdy baker Rosanna Pansino (2.2 million), were the first batch to see their faces plastered on billboards, subways, glossy magazine ads, and in TV commercials. This summer, YouTube has featured Vice, the guerilla news outlet (4.7 million), and Epic Rap Battles of History (10 million), a comedic series that stages musical showdowns such as Chuck Norris versus Abe Lincoln.

Mota appeared at the New York event, and her involvement paid immediate dividends in exposing ad buyers to the power of YouTube celebrity. Mota’s endearing I-was-bullied story outshone performances by Pharrell Williams and Janelle Monae, and hordes of “Motavators” wearing Aéropostale T-shirts with that moniker deluged Madison Square Garden, forming a line around the block-wide arena, to steal a glimpse of her.

“Our campaign helps [YouTube creators] expand their audience to casual fans, which is what you normally get from mainstream marketing,” says Kyncl. “That’s how they become household names. And that in turn puts a positive light on YouTube. It changes the discussion.”

“It legitimizes us all,” says Aimee Helfand, founder and CEO of the content network Baby­league. “If there’s a billboard for a Tom Cruise movie and behind that there’s a YouTuber, people driving down Sunset are impressed.” But not everyone in the large and voluble YouTube talent pool embraces the idea of trickle-down benefits. One YouTube source cautioned that there is already “ire” among some creators. “Let’s define a YouTube star as anyone with over 500,000 subscribers. There are 8,000 of those,” this person says. “Sixty-five thousand have more than 100,000 subscribers. And you’re gonna take 12 out of all those? That’s tough.”

What’s missing in the carping, though, is what the Beacon program represents: a big bet on YouTube’s native talent. Less than three years ago, Kyncl led YouTube’s “original channel” initiative, which plowed more than $200 million into creating series developed by mainstream stars such as Jay Z. Although there were a few standouts, such as Rainn Wilson’s SoulPancake, which has 1.2 million subscribers, most of the channels fizzled. (YouTube disagrees with this characterization, citing that 86 funded channels are among the top 1% YouTube channels and 35 have more than 500,000 subscribers.)

By going after traditional entertainers, Kyncl and company miscalculated the special appeal of the YouTube star and what their audiences love about them. They’re extremely good at engaging directly with fans, particularly very young ones; and they’re expert at marketing their content across social media. In a sense, Beacon is both a pivot and an affirmation of that original-channel initiative. YouTube still wants stars making content for YouTube; it just realized that the stars it wants have been on the platform all along.

Wojcicki seems ready to invest even more deeply in YouTubers. “We have all these pretty nascent creators. What do they look like in five years? Do they have longer shows? Can we help them economically to grow their shows? I don’t think we need new creators. All that content is original content, but how do we make it even better?”

Although Wojcicki wouldn’t discuss any future plans, one source says that YouTube is, in fact, already pairing some of its stars with Hollywood producers to create longer-form programs that could be cut into 11-minute segments to work both on YouTube and on TV. “Traditional content, I think it works on YouTube. I don’t want to say it doesn’t work,” Wojcicki says carefully, “but it doesn’t always take advantage of the fact that it’s a new and different medium.”

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