YouTube Scores A Solid Return On Its Video Development Fund | TechCrunch (click for full article) "Editor's Note: John Greathouse is a general partner at Rincon Venture Partners and has held a number of senior executive positions with successful startups during the past fifteen years, including Computer Motion, Citrix Online and CallWave. My son recently tried to call one of our older relatives. He dialed the number and quickly hung up with a confused look on his face. I asked him what was wrong and he replied, "I don't know. There's something wrong with their phone, it kept beeping." I called the number and was amused to hear a landline busy signal, something my cell phone centric pre-teen had never encountered. My son is similarly unacquainted with cable TV. Other than the occasional NBA game, he consumes his video content via our iPad and Xbox. Most of his online viewing is spent on YouTube. He is not alone. Mark Suster, fellow venture capitalist and serial entrepreneur, has written extensively about YouTube's evolution from dogs-on-skateboards to its current status as an entertainment medium rivaling cable television networks. Mark provides an excellent primer regarding the future of Internet TV HERE. YouTube has over 800 million monthly unique visitors who consume over 4 billion videos EACH DAY. Its evolution has resulted in a new class of entertainment entrepreneur, the creators of professional YouTube content, affectionately known as YouTubers. Feeding The New Networks Running an immensely profitable business has many benefits, including the ability to jumpstart an ecosystem which directly drives revenue to one of your core offerings. During the latter half of 2011, Google awarded a number of leading YouTubers and nascent Internet TV networks grants of $1 million to $2 million. Although estimates of Google's total investment vary, the industry insiders I spoke with believe it exceeded $100 million. Earlier this month, Google announced that it will spend an additional $200 million to promote YouTube content." Despite the snarky rumors that Google's content development program was poorly managed at its outset (e.g., some of the money was spent by YouTubers to purchase homes and not create videos), the majority of the funds were properly deployed by the emerging community of professional YouTubers. In fact, all of the most prominent Internet TV networks were recipients of such grants, including: Maker Studios, Big Frame, Machinima and FullScreen. Before the creation of YouTube networks, a handful of leading YouTubers were generating over $100,000 in revenue per year, simply by running run-of-site YouTube ads. Networks have significantly increased YouTubers' advertising revenue by negotiating sponsorships and large ad purchases with major brands. Rather than simply act as old-world talent agencies, Internet TV networks offer their talent a number of differentiating advantages which are difficult for YouTubers to secure on their own, including: Critical Mass - Even though some of the most successful YouTubers routinely generate several million views per video, large advertisers are challenged to spend efficiently within the medium, because even millions of views results in a relatively small advertising spend. This paradox is aptly illustrated in the following graphic, courtesy of Big Frame.