Last week, Google’s YouTube announced that it was in talks to let video creators charge viewers. With more than 800 million monthly unique visitors and more than 4 billion hours of monthly viewing, YouTube is up there with the major content sharing networks. Pre-roll and banner advertising on videos has been YouTube’s main source of revenues, and as it turns out, YouTube faces significant competition especially in the online video ad segment. In this context, a subscription based approach would amount to a new revenue channel for YouTube.

Advertising (both for its own sites as well as for its partners’) is something Google does really well, and YouTube does too. But as Google itself admits, it is not the most appropriate monetization approach for everything. Pay-per-view or pay-per-channel type subscriptions are interesting alternative monetization approaches, and in fact these have been in the company’s mind for more than three years now. Three key trends have developed over this time frame which make a subscription approach more relevant for YouTube today – smart TVs are gradually gaining adoption, smartphones and tablets are becoming pervasive, and Google Play has been launched, consolidating music, movie and book offerings into the Android Market platform. Smart TVs offer YouTube the opportunity to deliver alternative rich broadcast content through subscription channels without affecting the end-consumer’s payment psyche. For smartphones, the challenge in itself that mobile ads are considered more interrupting and disruptive. Additionally, obtaining truly relevant metadata for video ads is not a simple task, making video ad targeting challenging in general. In that context a subscription approach offers a non-obtrusive way to monetize, with Google Play aiding with the back-office aspects of mobile content subscriptions.

Challenges clearly remain, in understanding opportunity costs from potentially lower video virality rates due to subscriptions, while at the same time keeping competition in online video advertising at bay. As for the consumer, all-in-all, what used to be mostly a free service from YouTube will now cost some money. Will YouTube subscriptions receive mainstream adoption against these challenges? We will see!