Lessons on the volatility of digital communities: MSN Video and YouTube

Since our book (Communities Dominate Brands) came out a little over a year ago as the first comprehensive study into the area of digital communities - meaning that we covered all of the space including blogging, multiplayer gaming, mobile phone smart mobs, collaboration sites, TV interactivity etc - the area of digital communities has exploded and a lot of research is going into this space. One area nobody had any insights for, as it was too new, was that of attempting to sustain a lead in a given digital community.

We have the first case with elements for a case study. Video sharing sites. The numbers paint a frightening picture for strategic marketing purposes, and for community-buiding. Digital communties may well be the most volatile of any consumer groups in history.

Let me explain. Last week (Sept 13, 2006) the Financial Times reported on the registered users at the seven most visited video sharing sites, for July 2005 and July 2006. As the FT included Apple's iTunes - and we can expect the majority of iTunes visitors are still there for music, rather than to share videos, I have removed the iTunes numbers from this analysis. The remaining six sites are all primarily video sharing sites.

In July of 2005 the largest video sharing site was MSN Video, with 17.2 million users. A distant second was NetFlix with 10.6 M users. Far below them at third, was Yahoo Video, at only half the users of NetFlix and a third of the users of MSN Video, at 5.8 M. And to round up the six largest sites, the "tiny" sites in July 2005, with only 15% the size of the market leader, with similar user numbers were Atom Films (4th, 2.7 M), YouTube (5th, 2.6 M) and Google Video (6th, 2.3M).

How incredibly a digital community can evolve in one year. Lets track these roughly in order of size. MSN Video the undisputed leader continued to grow in user numbers to July 2006, today having 23.6 million users. Thats a growth of 37% in 12 months for the market leader. You would think that is excellent performance, wouldn't you. But before we celebrate MSN, lets see how the other five did..

The second largest in 2005, NetFlix, has barely managed a negligable growth, to 11.2 million users. NetFlix has set itself up to be overtaken by some of the rivals if any of them managed some impressive growth in the same period.

The third largest in 2005 was Yahoo Video, and it has in fact more than doubled, to 12.3 million users, passing NetFlix. Impressive performance indeed, Yahoo!

The fourth biggest in 2005 was Atom Films. This is the only one out of the six that managed to abandon users. Their numbers went down, from 2.6 million to 2.3 million to July 2006. Very poor performance.

I will skip the fifth for now, and go to the sixth-place rival in 2005, Google Video. From its user base of 2.3 million, Google has managed to grow its numbers ten-fold ! By July 2006, Google Video had exploded its user numbers to 24.5 million - yes ahead even of last year's clear market laeder MSN Video. From sixth place to overtaking the leader in only a year, that is remarkable. Or it would be remarkable if not for the best in class. I haven't told you about YouTube.

In July of 2005, YouTube was a distant 5th out of six, and with 2.6 million users, the size of one sixth that of the market leader MSN Video. In only one year, YouTube did grow. It grew most impressively, By July 2006 YouTube had shot past MSN Video and Google Video. And by no small margin, by growing to be 24 times larger in only a year, today YouTube is as big as MSN Video and Google Video and Yahoo Video - combined. YouTube has in fact 63.4 million users.

So what do we learn from this? The two largest players 12 months ago, MSN Video and NetFlix who were both more than twice as large as their nearest rivals, dropped from positions of 1st and 2nd to 3rd and fifth. Meanwhile, YouTube and Google Video, both only one sixth the size of the market leader, in only one year moved to numbers 1 and 2.

Digital communities? More volatile than any other market places we've ever seen. Expect these kinds of changes in other digital communities as well. And yes, if you are managing a digital commnunity, you cannot stop building it when you become biggest. It is much too easy for one of your rivals to catch up with you. YouTube was one sixth the size of market leader MSN Video and in 12 months grew to be over twice its size - all this while MSN Video itself grew very impressively, by almost 40%.

Comments

[Guest]

2nd to last paragraph, "Youtube and Youtube"
perhaps this should be "Google and Youtube"?

[Tomi T Ahonen]

Thanks Guest!

Yes you're right. I'll go fix it.

Tomi :-)