For YouTube, disruptive innovation means leveraging the company's current presence on Internet-enabled televisions to create a new market space of viewers engaging with YouTube "channels." According to reports this week in the Wall Street Journal and industry media, the company plans to spend as much as $100 million commissioning low-cost content in areas such as arts and sports. It is not attacking (yet) companies like Netflix and Hulu that are offering some of the highest-end offerings of popular movies and TV series. YouTube believes there are plenty of viewers motivated to access niche content in an ad-supported business model that doesn't need to spend very big money for the latest hits.
The company can also derive benefits from its ownership by Google. For instance, Google is introducing social networking features that enable users to see what content their friends like. Following in the path of other disruptive innovations that create new markets, this feature introduces a totally new dimension of performance that traditional competitors lack.
Yet there are plenty of outstanding questions that affect how dirsuptive a move this will be:
- Will YouTube's advertisers come from existing sponsors of TV, which could exert pressure to conform to current notions of the TV experience? Or will they come from Google's vast array of advertisers who target niches?
- Will the new viewership come from YouTube's hard-core afficionados seeking new content? Or will they be marginal YouTube viewers who want the company to move in different directions?
- Will the channels adhere to commonplace categories such as "sports," or will they redefine content to create totally new categories such as "extreme women"?
If that is Mr. Kamangar's vision, YouTube's disruptive innovation has barely begun.
This post was written by Steve Wunker. Click for more of New Markets' thinking on business models.