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The true cost of “free” when using YouTube on your website

The true cost of “free” when using YouTube on your website

When running your business, you engage with the services of many different suppliers. This can range from your power company to your web hosting service. In all of these arrangements, your business is buying a specific service at an agreed upon price.

For example, when you pay a web hosting provider, they are managing your server, your website content management system (like WordPress), backups, availability, and security. This simplifies all of that for your business and the monthly fee you pay them is a fair exchange of value for the services they provide.

Now let's look at YouTube. Everyone knows the power of embedding marketing videos on their website. YouTube greatly simplifies this, allowing you to easily add videos to help build your business. In return for this life-bettering service, you pay YouTube… nothing (?).

Sounds like a great deal, except when you think about it, would your business provide its service for free?

Most businesses are built to, ultimately, exchange risk and hard work (what it takes to build a business) for financial return. While it might be nice to give away services for free, most business owners can’t afford to do so and keep the doors open due to all the costs associated with keeping those doors open.

So when YouTube offers their service to you for free, it doesn't mean they aren't looking to do the same things with their business as you are doing with yours. It just means that you aren't the customer.

So who is the customer? Someone must be paying YouTube for the service that they provide. We know it's not you the business owner embedding videos using their player on your website. Who is paying their bills?

Here's the answer: YouTube's customers are the advertisers who pay for access to the large audience and detailed targeting data that YouTube provides them. This is similar to the way advertisers pay for the ability to show commercials on television networks, or banners on media websites. These advertisers are the real customers, therefore, YouTube's business model is optimized to solve for the problems and needs of these paying customers.

So what does this mean for you, the web guy or small business owner that embeds videos using YouTube on your website? It means that YouTube is offering that free service to you in order to serve their actual customer the advertisers. Let's go through a couple of the ways that YouTube ends up benefiting from your video embed that you may not have thought about.

Showing Ads 👀

The simplest, most direct way is that each video embed is a source of your customer/leads’ eyeballs that YouTube can now show ads to. This is in the form of inserting video commercials into your content, banner overlays on top of the video, and suggesting other videos after the user watches your video.

These are all fairly obvious and they do offer switches to turn some of this off during the embed process. However, the difficulty lies in keeping up with this as YouTube continually adds new ways to monetize these free video views on your website. So while you may believe you have ads on your videos turned off today, when YouTube introduces a new banner format, icon, or related videos format tomorrow, you’ll need to figure out how to turn them off all over again. You must continually stay on top of these changes and keep adjusting your embeds, otherwise, what you thought would be a clean video promoting your business ends up showcasing ads for other products. Or worse... ads for your competitors.

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User Siphoning

This is a much more subtle cost but one that can have an incredible impact on your business. If you have ever watched a video on YouTube, you’ve most definitely seen related videos appear at the end of the video you watched. These related videos are personalized to each user’s behavior and fine-tuned with the strength of a million Google AI servers to pull them into watching more content. To be blunt, this is weaponized AI being used to maximize YouTube's chances of convincing a user on your website who watched your video, to watch additional videos chosen by YouTube. And with each of these videos watched, YouTube is able to serve more ads and make more revenue. That's the payoff on their end. Get your customers/leads to watch more YouTube videos and show them more ads.

YouTube costs you customers

In addition to related videos, there's the not-so-subtle YouTube logo shown overtop your video. This means you are contributing to the company’s branding with every single watch of content on your website. By the time a user finishes watching one of your videos, it can be hard to tell who gets more benefit; your business or YouTube with all of the branding they throw on top.

Secret Weapon: Detailed Targeting 🎯

As discussed above, part of what YouTube is selling are the eyeballs to watch advertiser videos. But what becomes just as important for advertisers is the ability to target ideal potential customers. Showing ads for dog food to people without pets would be a huge waste of money. So YouTube needs to be able to deliver as much detail as possible on the motivations, demographics, and current needs each user has in order to better target ads for their advertisers.

The latest in AI-powered targeting is called "in-market targeting". It uses AI to attempt to determine which users are likely to be ready to purchase some category of goods or services. This makes sense as we are all in-market for various goods or services at a given time. We might be tired of fixing our old car and so we are ready to start looking for a new one, but it might also be lunchtime and we are hungry and trying to figure out what food to get delivered. We are constantly "in-market" for purchases both large and small. Allowing an advertiser to show us their ad for a healthy and convenient chicken sandwich when we are ready to head out for lunch can be devastatingly effective at driving our behavior. Whereas showing us that same ad late in the evening when we are about ready to go to sleep would be almost useless.

Great. So "in-market targeting" is the greatest thing since sliced bread for YouTube's advertisers. How does this matter to your website where you simply embed a video showing off your beautiful dental office and smiling, friendly staff? Maybe it’s hit you how this ties together. YouTube is tracking the audience that views your website and feeding that into AI servers to determine what each user is in-market for. What that means, using the example of the dentist, is YouTube now knows these users are in the market for dental services. It learned that because they came to your dental website and watched your office promo video.

Now the value for advertisers kicks in. Those users will start seeing ads for other dental offices nearby as you have just clued YouTube (Google) into very valuable potential leads for your competitors. Every dentist using Google or YouTube ads can now start showing banner and video ads around the web talking about why they should choose their office over yours. By embedding a simple video on your website, you have just given all of your competitors access to your hard-earned leads who were highly likely to buy from you since they were already on your website. But now, they start researching or second guessing as they suddenly see ads for other options at every turn. All of us have been the victim of viewing a certain product and then, suddenly, every ad across the Internet seems consumed with selling variations or alternatives to that product. Now you know how it works. Its all enabled by an unassuming, “free” video player.

Other Options

At least now you know the actual cost of that video player. Part of the reason YouTube seems like such a great bargain for you is because of the imbalance in understanding the amount of value they get every time a business like yours uses their player. If you are fine trading off some of your leads and customers in return for the free price, then YouTube may work for you.

On the other hand, if the cost of leads and customers being siphoned away seems too high, then there are other options. Just like your web hosting and other services, there are providers that will give you simple tools to embed videos just as easily as YouTube. You pay a small monthly fee in exchange for a video player that is focused on delivering your video to your customers and keeping those high value leads on your website where they belong. Matching your site’s look, feel, and color scheme, with no obnoxious logos or branding to distract from your message.

We provide unlimited video hosting at Swarmify, but there are many other providers depending on your needs.

Try SmartVideo today!