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The Maturity and Evolving Nature of E-Commerce: YouTube

Updated on February 3, 2016

E-commerce, otherwise well known as internet business, has been under constant development. While others see internet business as a revolution, it is more of an evolution basing on the level of innovativeness and use of strategic tactics to succeed where others have failed (Shinal, 2012). In both developed and developing markets, e-commerce has experienced outstanding growth especially with the introduction of non-banking players in the payments sector. According to Capgemini Strategic Analysis Group, (2013) by 2011, global e-commerce sales stood at $661 billion.

By 2016, it is expected that e-commerce sales would have surpassed the $1 trillion sales mark (Oracle Endeca, 2012). Notably, the hasty increase in the utility of broadband connections, smart phones and post-modern payment services have been the major drivers of the e-commerce evolvement. However, despite the increased evolvement, security remains a major concern for internet business. Basing on consumer behavior, online retailers are re-aligning their strategies to allow shoppers to shop at their own comfort whether in the office, at home or even when travelling (Narwhal, 2012).

According to Shinal, (2012) significant evolvement of internet business has been attributed to the changes experienced in consumer behavior due to increased availability of cheap, affordable and dependable technology. However, studies have shown that the contribution of online retail sales to the general global retail sales is still low (Arthur, 1996). Despite the fact that this could gradually become high, the evolution road ahead may not be as smooth as it seems for internet business (Capgemini Strategic Analysis Group, 2013). Challenges from multiple fronts keep hitting the e-commerce industry owing to the fact that it is a relatively new industry. A huge number of online retailers still do not have what it takes to successful venture in e-commerce. The presence of exemplary digital marketing skills is limited while most of the online retailers still lack appropriate governance configurations in place. Security has been one of the most challenging issues in e-commerce. With increased advancement in technology, the sophistication and complexity of online fraud has been an intricate worry (Cash Run, 2012). Nevertheless, the constantly developing and innovative dynamics of internet business implies that evolution is gradual but successful.

One significant manifestation of the evolving nature of e-commerce is the story of YouTube. Unlike well-established websites including pioneers of e-commerce, YouTube is currently ten years old in the internet business industry. Its growth, development and level of innovativeness are simple characteristics of a developing and maturing e-commerce sector. YouTube was initially started as a video-sharing website back in 2005. On this website, users could view videos, upload videos or even share them. One significant factor to note is that YouTube was started by employees of Paypal, which is another fundamental player in the payments sector of e-commerce. According to Glenn, (2010) the start of YouTube could eventually lead into one of the biggest most creative e-commerce ideas in the world. After the domain name Youtube.com was activated back in February 2005, the subsequent months saw significant developments which have also been seen throughout the years since the launch of the website (Richard, 2008).

The websites initial capital in relation to its current revenues is a clear indicator that if still not developing, e-commerce has indeed reached maturity. The site started with an initial capital of $3.5 million injected by Sequoia Capital (Katie, 2009). Within the first few months, the website had experienced huge popular growth indicating the e-commerce was indeed moving a step ahead. The distinguishable growth of internet businesses, especially considering the case of YouTube is an indicator of successful online retail business as well as other e-commerce activities. For instance, currently, the number of uploaded videos on YouTube is outstanding an uncountable although the first YouTube video ‘Me at the Zoo’ was uploaded barely ten years ago by one of the co-founders (Nielsen Media Research, 2006). Notably, in 2005, the growth of the site was attributed to a number of activities.

First and foremost, video HTML embedment was conducted to enable users to upload their videos as well as share them in July 2005. Subsequently, the website began another section which included the top videos page on the website where users could view top-rated videos. Notably, this came in line with the ‘star-rating’ system where users could easily rate video between one-star and five stars (Richard, 2008). This developments and the level of creativity and innovativeness is the basis of increased growth of YouTube. Notably, in October 2005, YouTube launched subscriptions into the website including the full screen view of video (Katie, 2009). Subscriptions included a process where users would be required to subscribe to their favorite video channels or videos at a fee.

The sequential occurrence of creativity and innovativeness on the site is the major reason as to why by the summer of 2006, YouTube was considered as the fastest growing website (Nielsen Media Research, 2006). During this period, the site saw a rise in its figures as video uploads shot to an average of 65000 video uploads per day with a corresponding average of 100 million views each day (Katie, 2009). YouTube, in its infancy stages even surpassed MySpace’s growth rate to become the fifth most famous website. According to Nielsen Net Ratings, (2006) YouTube had approximately 25 million visitors each month.

The website is more famous among teenagers although the elderly also have a huge percentage on membership. The superiority of YouTube on online marketing is un-debatable (Marcelo, 2013). Studies have shown that YouTube currently commands about 65% of the online video market in UK. It should be noted that YouTube launched its marketing and advertising framework after colluding with NBC in 2006 (Richard, 2008). Since then, online advertisements and marketing has been the center of YouTube’s existence (Nielsen Media Research, 2006).

The growth and development of YouTube is also attributed to the acquisition by Google, which is currently an internet giant. A report on the investors profit breakdown during the acquisition is a clear pointer and marker of evolving e-commerce. The consumption of a huge bandwidth by YouTube in 2007 depicted the growing nature of internet business even as the introduction of smart phones grew extensively (Qin, et al, 2014). This led to another creative, yet strategic framework on the site where users could now scroll through the website interface in their local languages (Glenn, 2010). Strategically, this could see the attraction of potential non-English speaking customers. This option was a premeditated and calculated move to give users a more exciting experience (Solomon, et al, 2011). Revenues almost doubled due to this strategic move. Notably, two years down the line, YouTube came yet with another significant innovative platform; the automatic speech recognition. Through this, users could simply speak out when logged onto the site for various commands and actions.

Apart from enhancing user experience, this move was aimed at increasing the flexibility and ease of access to videos and other functions offered on the website (YouTube Optimization). Subsequent innovations included the Vevo launch into the website and a thumbs rating system which replaced the previous star-rating system. The implication of this innovations and constant development can be seen as an evolving nature of e-commerce (Shinal, 2012). The success of YouTube can be attributed to the high level of creativity and innovativeness that the co-founders together with Google have shown since the sites establishment. For instance, the featuring of film rental in November 2011 on the website drove revenues and profit margins even higher on YouTube (O’Malley, 2006).

E-commerce, basing on the constant development and level of innovation could be seen as approaching maturity. However, advances in technology especially in the IT sector are too unpredictable. It is hilarious to note that no one knows what ‘the next big thing’ will be. Analytically, even when YouTube merged with Google video in June 2012, it was little anticipated that it could result in a more comprehensive and integrated user experience. The anticipation of the next innovative strategy on internet business gives a picture of evolving e-commerce.

YouTube’s success can further be attributed to the considerable amount of user events integrated as part of the sites products. For instance, YouTube Awards conducted annually, are given out to recognize the best YouTube videos. This system allows users to vote for their favorite videos in the preceding year (Wharton School of the University of Pennsylvania, 2006). The users are recognized as the YouTube community and always have their individual say when voting the best video. Another significant factor to note is the involvement of YouTube in the production of televised presidential debates during the US presidential elections (Glenn, 2010). This was done alongside CNN. The candidates from both the Republican and Democratic fronts answered questions which were submitted through the website. The utility of YouTube can thus, be seen to have shifted focus from a more social platform to a more broad, comprehensive and all-inclusive site. Users can now view content for various purposes including professional and educational services on the site (Marcelo, 2013).

Partnerships with entertainment companies such as Lions Gate Entertainment and MGM have also been major milestones in the sites e-commerce journey. Currently, entertainment sites can be able to upload and post full-length movies, films and TV series. Furthermore, the site conducts advertisements as part of its products. US viewers and users can view these advertisements in a section known as ‘Shows’ on the website (Katie, 2009). YouTube specifically recognizes this strategy as part of the overall strategy to outwit other sites and counter stiff competition. It is noted that websites such as Hulu have, of late, been strong competitors of YouTube.

Hulu, for instance, offers its users material and products from Disney and Fox. Therefore, it can be seen that e-commerce products are shifting from the conventional online retail business to a more dynamic-level state-of-the-art services. The incorporation of and partnerships with entertainment industries has made YouTube to be recognized as a ‘speakers’ corner’ (Pete, 2011). Google recognizes YouTube as a center of democracy for its users and also a democracy promotional tool. Furthermore, the site has partnered with the US government where videos embedded on state websites are available on YouTube through a domain known as youtube-nocookie.com.

The introduction of online film rentals service on YouTube in 2010 saw increase revenues although the service is offered to UK, Canada and US users only (Marcelo, 2013). However, the co-founders note that there are steps to increase the availability of this service to users in other parts of the globe. Al the same, YouTube has been able to offer free streaming of various video contents to its users. This service began in 2010 and has seen tremendous development. For instance, the site is able to stream about 50 Indian cricket matches (Glenn, 2010). The co-founders note that this service is a pioneer of free streaming of major sporting events. At a glance, it can be seen that internet business has moved to a different level. Offering such services is strategic enough to attract more viewers as well as increase subscriptions (Marcelo, 2013). Based on the ever-increasing number of YouTube subscribers, it can be anticipated that business-boom for the site will grow at a steady pace (Capgemini Strategic Analysis Group, 2013).

The sites development and innovativeness is also evident in the new design created and correspondingly launched in March 2010. As Google’s Product Manager, Rajaman, notes, the new design was aimed at simplifying the user interface to a level where the time spend by users on the site would be increased. According to the Wharton School of the University of Pennsylvania, (2006) the more the time a user spends on the site, is the more the revenue. Two months after the launch of the new design, YouTube reported that it was serving close to two billion videos in a single day.

Analysts termed this as double the audience of three major prime-time TV networks in US put together. One year down the line in 2011, YouTube reported that daily video servings had increased to three billion (Pete, 2011). Later on in 2012, the numbers had grown even further to four billion YouTube videos streamed in a single day. These figures are not just numbers but statistics which indicate growth and development of e-commerce. With increased technology, the level of internet utility has gone a notch higher.

Cheap availability and reliability of the internet have both been the basis of increased e-commerce. Users can easily access internet through the large range or smart phones readily available nowadays. Tablets are also increasing in number with different brands each coming up with a unique product that suits technology needs of the x-generation (Marcelo, 2013). E-commerce, on the other hand, is largely dependent on the availability and utility of the internet by consumers. Wharton School of the University of Pennsylvania, (2006) notes that; YouTube, for instance, can attribute a large percentage of its growth to the availability of the internet and advances in technology.

According to data, the consumption of internet-based commodities and products has gone higher between 2005 and 2008 (Richard, 2008). Firms and organizations are shifting their focus to the internet to create online stores where customers can have their transactions as well as indulge in interactive forums with retailers. According to Capgemini Strategic Analysis Group, (2013) this shift in e-commerce is largely manifested in the success that YouTube has had despite the fact that it is still young in the industry.

In the US, it is estimated that YouTube is almost becoming a dominant player as an online video provider. By 2010, the firm was commanding almost half of the total US online video market at 43%. This implies that YouTube’s e-commerce strategy has surpassed other players’ strategies and made the firm a leader. Before Salar Kamangar came in as YouTube’s new CEO, Hurley had made quite significant development in the firm as CEO. However, the new regime also saw quite a number of significant developments. According to Pete, (2011) for instance, after Hurley stepped down, it was estimated that 99% of views on the YouTube website were attributable to 30% of videos uploaded on the site.

Furthermore, other significant developments by the site as part of its e-commerce strategy included integrating the Google Chrome browser and the site. This also included a directly integrating the YouTube website and the Google+ social network (Pete, 2011). This enabled users to view and stream YouTube videos directly from the Google+ interface. The CEO noted that this was also aimed at enhancing user experience and allowing users to conduct multiple functions (YouTube Optimization). YouTube’s website interface design was also changed in 2011 to match other social networking websites including a minor change on the YouTube Logo (Thompson, 2013). These changes are not mere shifts in product designs but, represent a well-calculated internet business strategy aimed at enhancing utility and customer experience (Narwhal, 2012).

Following Google and Facebook closely, YouTube is currently the third most visited website (Nielsen Media Research, 2006). The success of the site has risen over the years to an extent where the site reports that each month it records 800 million unique users. Every minute, approximately 60 hours of fresh videos are uploaded on YouTube. The firm has evidently gone further to invest in premium and original video channels. The launch of these video channels is estimated to have cost the site about $100 million. The firm’s continuous investment in mainstream media over the past few years is an indicator that indeed e-commerce is on a continuous development track (O’Malley, 2006). The introduction and subsequent launch of mobile and tablet applications are indicators of increased and innovative e-commerce strategies.

Through online advertising, YouTube has innovatively engaged in a transformative e-commerce business model that has seen the site grow to greater extents. Despite the fact that a vast majority of YouTube videos are free for viewing, the sites premeditated internet business strategy is an indicator of evolving e-commerce (Pete, 2011). The site has been able to surpass stiff competition from other online video providers and stand out as a leader in the industry. With increased use of advanced technology, it is expected that the level of innovativeness by the site including the strategic online business model will be the center of e-commerce maturity (Qin, et al, 2014).

More services and products are expected to come about even as industry trends keep on shifting. Marcelo, (2013) notes that music producers, singers, filmmakers, entertainment hubs etc, make use of YouTube on daily basis. While the figures keep on rising, e-commerce will keep on developing. Through effective e-commerce strategies, YouTube has been able to promote and enhance democracy through the model it employs. Nevertheless, investment in e-commerce is costly and requires precision (YouTube Optimization). The initial cost, operating cost and maintenance costs of e-commerce require heavy investment to guarantee constant development and innovativeness

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