It turned out that Boss Huang's strategy was very effective. As they continuously promoted through reviews online, and coupled with the fact that Google's phones were released a step earlier and had the first-mover advantage, they had consistently held Apple's phones at bay.
Therefore, unlike the post-era Apple's unhindered dominance in the smartphone industry, Apple's phones in this world found themselves continuously suppressed after their release. Google was completely dominating Apple in terms of output. Especially since Apple firmly believed that their phones, in terms of system, functionality, and hardware, were far superior to the opponent's. Yet, in terms of publicity, they were actually inferior to Google. How could they possibly accept this? They could tolerate anything, but not this!
It's just doing reviews, can't they do it themselves?
Thus, Apple quickly joined the fray, starting to invite these video bloggers to review their phones and promote them. This led to a money-burning war between Google and Apple on video websites.
That's right, a money-burning war.
Placing advertisements on video websites costs money.
In early 2007, Los Gatos and Netflix had already captured approximately 80% of the video website market. As for the remaining 20%, that was YouTube's market. In fact, this market was intentionally left by Jiangnan Group to avoid anti-monopoly investigations had Jiangnan Group monopolized the entire video website market.
The reason why these two websites could dominate the market was naturally attributed to Jiangnan Group's low operating costs.
Jiangnan Group's storage servers had already progressed to the 4th generation. The cost of each main server was around $1,200, while its selling price was $12,000. However, even at ten times the price, it was still about half the price of servers with equivalent performance from other brands. This left Jiangnan Group's servers with no competitors, almost monopolizing the entire storage server industry.
Even competitors who were at odds with Jiangnan Group had to grudgingly purchase Jiangnan Group's storage servers, otherwise their operating costs would directly double. No capitalist could tolerate such a price and cost difference.
It is worth mentioning that the servers Jiangnan Group sold to its own video websites were priced the same as the market price, $12,000 per unit.
However, Los Gatos and Netflix were particularly generous in their spending, investing over $3 billion annually to purchase servers from Jiangnan Group to expand their website capacity.
Such a terrifying investment naturally allowed Los Gatos and Netflix, these two video websites, to have far superior service quality and user experience compared to other video websites.
While the videos provided by YouTube generally had a clarity of 270p, Los Gatos and Netflix were already able to offer users an average of 480p, and if their own network speed could support it, they could even watch 720p video services.
And the video size limit was 500
Among them, members could watch premium content on the website, such as TV series, movies, music videos, etc., which were high-quality content created by various cultural enterprises that required substantial costs. These could only be viewed by members.
Content created and uploaded by ordinary users could be watched for free, thus attracting more users to the website.
However, there has always been a scarcity of high-quality premium content in the world, while user-created content is abundant. The $3 billion server procurement costs mentioned earlier for these two websites, $2.9 billion of it was used to accommodate this user-uploaded content.
As a result, the revenue brought in by members could not cover the website's expenditure. It is important to note that these two websites had to pay $6 billion annually for server purchases to Jiangnan, but they did not have $6 billion in funds. Moreover, Boss Huang could not indefinitely invest in these two websites, so they could only borrow money from Jiangnan Group. Currently, they each owed Jiangnan Group over $5 billion in loans. Therefore, generating profits to repay debts became the top priority for both companies.
Naturally, advertising became the most effective means.
The 15-second pre-roll and mid-roll ads are a given, as they are standard practice, but the advertising revenue generated from these is ultimately limited.
Thus, in early 2007, both websites almost simultaneously announced their creator incentive programs, ostensibly a program to provide cash incentives to all creators who uploaded videos to the website.
This was a model where cash rewards were given based on the traffic and clicks of the creator's videos.
Some might find it strange, isn't this even more costly and increasing operating expenses?
Of course not. Because of the absolute dominance of their own video websites, compared to the post-era, these two websites played a trick: the cash rewards were not linked to things like video clicks at all, but rather to video advertisements.
Both Los Gatos and Netflix had established their own ad alliance platforms, where any company wanting to place ads could freely post their requests.
Creators could then accept these orders themselves. This way, their posted videos would automatically feature these advertisers' pre-roll ads.
However, this was just the most tedious form of advertising. The currently popular advertising business model on these two websites was actually for creators to shoot creative advertisements themselves and directly embed them within the video content.
Then, links corresponding to these advertisers would automatically appear on the left side of the website, with detailed promotional pages of the advertised products below, or various online shopping links, shopping phone numbers, and so on.
Users would only count a successful advertising promotion after they clicked the link themselves. Creators could then receive corresponding advertising fees from advertisers.
Of course, as an intermediary, the platform would also take a small cut of about 50%.
This form of advertising cooperation was warmly welcomed by advertisers. Previous online advertisements were too rigid, just simple pop-up ads, with very low user conversion rates. Perhaps only one purchase for every ten million clicks, which made many manufacturers who invested heavily in advertising frustrated to the point of wanting to commit suicide.
However, with the emergence of this model, because users were not forced to click, they would only click if they were attracted by the advertisement and became interested, resulting in an astonishing conversion rate, almost exceeding 10%.
This means that for every ten users who clicked, one user would eventually purchase the product. This was what advertisers were most delighted with.
Correspondingly, the cost per click also increased significantly, but because of the tangible increase in sales, both advertisers and creators were very satisfied.
Simultaneously, many creators emerged who were very adept at using various methods to advertise in ways that were hard to guard against. The overall platform environment had almost reached that of Bilibili around 2016, which was indeed astonishing.
Of course, this also brought a side effect, which was that some advertisers would privately contact some big video bloggers, offer them money privately for promotion, and bypass the platform as an intermediary to earn profits.
This situation was unavoidable. However, the platform also had countermeasures. That is, during the review of videos by the auditing team, they would check for advertising intent in the videos.
Once a video with advertising intent was discovered but had not gone through their own ad alliance, the account would be directly banned for a period ranging from one month to one year, and all unpaid advertising revenue would be forfeited unconditionally.
According to the video website's rules, advertising revenue would only be disbursed after three months. This means that once private deals were discovered, not only would they be immediately banned, but also their advertising revenue for the past three months would be forfeited.
In addition, advertisers would have their pre-charged advertising fees directly deducted.
After a few reckless creators were made examples of, most of the large-scale creators would not commit such foolish acts, and advertisers also stopped engaging in such opportunistic behavior.
Thus, the two websites successfully promoted this advertising model. As a result, within three months, the advertising fees exceeded $1 billion. Although only $500 million was their own, it represented that these two websites had possessed an extremely terrifying money-printing machine.