With Google's top ad exec now running YouTube, LA creators are stuck in wait and see mode

By Michael Carney , written on February 11, 2014

From The News Desk

Less than a week ago news leaked of a new CEO at YouTube, which took the content creator and advertising communities by surprise. Confirmed by YouTube parent Google, Susan Wojcicki, the search giant’s 16th employee, former landlord, current top ranking female, and previous SVP of Advertising, will be assuming the top spot at Google’s second most important asset. While the move signals a deep commitment from Google toward maximizing the revenue generated from its video platform, it also begs questions about what YouTube’s future will look like and how current senior executives may fit in.

The news has far reaching implications within the Los Angeles YouTube ecosystem, where many of the platform’s largest multi-channel networks (MCNs) are located and where the YouTube has opened a 41,000 square foot creator space aimed at galvanizing content production. MCNs have spent the last year trying to decide if YouTube is friend or foe, and a change in the face at the top of the organization adds an entirely new source of uncertainty.

PandoDaily has spent the last week discussing the news with members of the online video ecosystem, including YouTube stars, video network executives, investors, and former YouTube employees. The takeaway may best be described as a sense of surprise, followed by cautious optimism. No one doubts she can build a big advertising business – she’s done it before – but there’s no shortage of fear that the type of ad business Google and Wojcicki favor may end up killing what makes YouTube special.

Prior to Wojcicki’s appointment, YouTube didn’t have a CEO but was effectively run by the company’s SVP Salar Kamanga, with a heavy dose of input from senior Google leadership. Kamanga, who was Google’s ninth employee, replaced YouTube founder and former CEO Chad Hurley in 2010. The former Google VP of Web Applications is a engineer’s executive and has been notorious for putting technical considerations ahead of creative or business ones, much to the chagrin of creators.

More recently, the creative community got an ally in YouTube’s senior ranks when the company hired former Netflix VP of Content Robert Kyncl as its Head of Content and Business Operations. Kyncl and his staff were responsible for overseeing YouTube’s push into premium content, including doling out hundreds of millions in production financing to channel creators and earning YouTube a seat at the annual advertising Upfronts, a right of passage in the traditional TV and over-the-top video worlds.

For months, rumors have swirled that Kamanga was looking to step down, leading to increasing speculation that either Kyncl or his technical counterpart, Shishir Mehrotra, would be named CEO. There was even speculation the two would assume co-CEO roles. With Page’s history of adding only product and engineering-focused executives to his inner circle – aka Page’s eponymous “L team” – Mehrotra was seen by many as the likely choice. It must sting that both were bypassed by a Page confidant who is largely a YouTube outsider.

By all accounts, Wojcicki’s appointment was a shock even to those at the upper levels of YouTube management. The content community is rightly concerned by the shift, as less influence for Kyncl means less representation for the creators as the future of the online video ecosystem is taking shape.

As one YouTube ecosystem executive told PandoDaily under the condition of anonymity:

It almost seems like they dangled it in front of [Kyncl], only to give it away to another ‘insider.’ Does that mean they don't trust him yet? Or that Larry always will have his loyalists at the top? You have to wonder what this means for Kyncl's own upward mobility. I think he was shocked. It never feels good when you have a ceiling placed on you right as you are hitting your stride in your career.

Kyncl and Mehrotra both reportedly received promotions in conjunction with Wojcicki’s appointment, but this feels like a ceremonial move at best, and surely they’re not the promotions the two had hoped for.

One explanation for the Wojcicki move put forth by Re/Code is that it was necessary to keep her happy and out of the hands of wooing VCs and executive recruiters. With Sridhar Ramsawamy joining Google’s senior team to oversee its commerce initiatives, Wojcicki had recently had her responsibilities halved and had expressed interest in finding her own kingdom to run. But playing musical chairs at a company as massive and complex as YouTube seems risky at best.

In a statement on Wojcicki’s appointment, Google co-founder and CEO Larry Page said:

Salar and the whole YouTube team have built something amazing. YouTube is a billion-person global community curating videos for every possibility. Anyone uploading their creative content can reach the whole world and even make money. Like Salar, Susan has a healthy disregard for the impossible and is excited about improving YouTube.

No one knows if we’ll will see further shakeups at the senior level, but it wouldn’t be surprising to see Wojcicki bring in her own senior staff, or those passed over for the CEO position choose to pursue other opportunities. One wrinkle in this narrative is the fact that Kyncl just spent the last year playing hardball in negotiations with major media companies. Whether he stays at YouTube or takes another role, these are likely to be relationships that he wants to preserve. Pulling the ripcord now could rock the boat in ways that he may not want to do.

As a prominent online video investor said:

It’s obvious that [Google] wasn’t pleased with something. Maybe they’re just trying to distance themselves from what the market perceives as failings by current management – things like the revenue split and lack of ad support. It’s a lot easier for someone new to look partners in the face and say, ‘We messed up, but we’re going to do things differently from here on out.’

Wojcicki is Google’s top advertising executive. Her appointment at the top of YouTube signals an increased focus on its monetization. The question in the minds of many members of the YouTube ecosystem is be does this signal a shift away from content and toward product?

“YouTube has gone largely programmatic with TrueView,” one investor tells PandoDaily. “But it’s overly reliant on machines, in my opinion, and not enough on humans. They’re missing out on the emotional component that has been so successful with TV advertising.”

That would seem to be an argument in favor of a senior executive like Kyncl, but that ship, it appears, has already sailed. Whether Wojcicki will agree with this assessment and is capable of taking action to remedy the situation remains to be seen.

Google has long chosen to treat all advertisers and all ad inventory equally, favoring technology-powered or programmatic solutions over more manual approaches. But online video ads aimed at drawing big brand spend away from traditional TV commercials are not the same as Web banners and text-based Search ads. Sure Wojcicki has overseen AdWords, AdSense, Analytics, and DoubleClick, but she’ll need to prove an entirely different skillset to succeed in today’s video ad environment. Or, maybe Google is intent on bending that environment to more closely mirror its existing advertising businesses.

Inside Google, Wojcicki is known as pragmatic and rational, but unafraid to take risks and chase big outcomes. In that way, she's a lot like Page. Don't expect the notoriously private executive to all of a sudden start glad-handing and spending wildly. This is a decidedly un-Hollywood approach, making Wojcicki’s appointment into the top spot telling as to Google’s priorities.

As for who will represent YouTube’s interests in Hollywood, former Google Director of Product Management and current Homebrew partner Hunter Walk tweeted his thoughts:

As Vertere Group CEO and advertising veteran Tim Hanlon told the LA times, Google’s choice of Wojcicki demonstrates that Page and co. are still treating YouTube like a technology company, not a media company. Many in the LA creator community share this assessment.

It’s not that either is necessarily the right or wrong answer, but more that companies who try to do both often fail to excel in either area. Look no further than Yahoo’s most recent decade for an example of this fact. For content creators, YouTube acting like a media company would look like a focus on driving premium content creation and attracting premium advertisers. On the other hand, a technology-first approach means prioritizing scale and efficiency above all else, and likely means more ads alongside mediocre user-generated content and less control for those looking to build real businesses on the platform.

YouTube has perhaps never been healthier from Google’s perspective. The platform also attracts north of 1 billion monthly visitors today, with an increasing percentage of this activity coming from mobile devices – although puny mobile ad rates have begun to weigh the platform’s overall CPMs. That surely matters, but YouTube still manages to generate an estimated $5.6 billion in yearly ad revenue and $1.96 billion in net profit according to eMarketer estimates, numbers that it claims are up 66 percent year-over-year. Google doesn’t breakout YouTube’s financials publicly, making it difficult to verify these estimates.

But given YouTube’s scale and its position as the dominant online video platform, even this level of revenue and growth leaves something to be desired. The fact that it’s taken Google, the undisputed king of Web monetization, nearly a decade to properly monetize this beast is a testament to just how hard the video category really is. It also calls into question the significance of rumors that Yahoo, Facebook, Twitter, and even Amazon may look to build or buy YouTube competitors.

The view from the creator community has been far less rosy.

Despite the aggregate growth of YouTube, it’s still proven a difficult platform on which to build a sustainable business. Even networks with massive audiences like Maker Studio and Machinima have struggled to find a workable model within YouTube’s my way or the highway fiefdom. As a result, prominent stars and executives have called for Google to shift its revenue split further in favor of content creators, to provide additional control and flexibility around advertising, and to increase sales support, among other requests.

Among the most vocal critics of YouTube’s current business model has been media entrepreneur and YouTube funded channel creator Jason Calacanis. He was quick to react to the news in a blog post last week, saying that “YouTube is the most important product at Google” but “Google is blowing it,” calling it the most “loved/loathed platform in the world.” In the same post, Calacanis suggested that Wojcicki could solve many of the current problems by adopting a very un-Google-ly multi-tiered partner program. As he described it, YouTube should “create an objective system where not everyone is treated the same. Where you are more loyal to the folks who are most loyal to you.”

Wojcicki has long been a YouTube proponent and was one of the loudest advocates in favor of the company’s acquisition of the then budding video platform for $1.65 billion in 2006. The company is now worth tens of times that sum. Her worth at Google is long ago cemented and her aptitude in the adtech community beyond question. It will be the creatives, both on Madison Avenue and within YouTube’s global community, to which she has more to prove.

She’s already begun a much needed charm offensive aimed squarely at the creator community, tweeting:

The creator community – and nowhere more so than in LA – will be watching Wojcicki’s actions more than her words, looking for answers to their very real concerns about YouTube’s future.

Google and YouTube declined to comment for this article.

[Image via jm3, Flickr]