YouTube vs. Vimeo
YouTube and Vimeo are part of the electronic market of online video hosting. They operate in the same market and offer the same services, albeit at different levels of quality and at different prices. The cost structures are very similar, as are their distribution channels. But why is YouTube so much bigger then Vimeo, if their business models are so similar? First, both companies will be introduced, thereafter we will explain the differences in performance.
YouTube is a video sharing platform, primarily based on user-generated content. Since its foundation in early 2005, it has grown into the largest online video streaming service in the world, with a staggering 71.5% market share – measured in terms of unique users – in June 2015 (Statista, 2015). Today, YouTube accounts for billions of views by millions of users daily (YouTube Press, 2015). YouTube was taken over by Google in 2006.
Vimeo, founded in 2004 and bought by IAC in 2006, situates itself as a video sharing website, rather than a hosting website. Its focus is on sharing creative work and personal moments with a supportive community (Vimeo, 2015a). With a US market share of 0.9% (Statista, 2015) Vimeo satisfies a small niche market, compared to larger competitors such as YouTube.
The initial focus of both companies differs: YouTube is focusing on the viewers, by providing them with as much content as possible. The focus of Vimeo is different: they focus on the uploaders and constructive feedback for them. This difference may explain why Vimeo is charging their uploaders, while YouTube does not. This focus of Vimeo led to a higher quality of video’s on Vimeo’s platform. Despite this, the price-sensitivity of the consumer makes YouTube more attractive, as shown in the market shares (71.5% vs. 0.9%).
Another difference between the companies is the corporate structure. YouTube is a part of Google and can therefore rely on the deep pockets of the parent company. The parent company of Vimeo is IAC, which is much smaller than Google.
While YouTube and Vimeo have access to the same distribution channels, the usage is ultimately dependent on their users and uploaders. With YouTube enjoying a larger market share, the company has a stronger brand awareness and will be used most often by the users through those distribution channels, despite the fact that Vimeo is available too.
Taking into account these fundamental differences, we believe that YouTube has a distinct advantage over Vimeo, despite the fact YouTube’s operations are not profitable. We believe that in the long term, YouTube will continue to grow and erode the profitability of competitors through their predatory pricing, supporting further growth and the conquering of additional market share. Vimeo may be able to satisfy the long tail of the market for another while, backed by increased network effects and electronic brokerage effects, stronger brand awareness and increasing price sensitivity, YouTube will inevitably steal away Vimeo’s users in time.
Christian van Gelder (342109cg)
Euclid Haralambidis (313081eh)
Joey Kortram (344951jk)
Ivar van der Lugt (418691il)
Arjan de Winter (372092jw)
Statista. (2015). Statista. Opgeroepen op September 20, 2015, van Statista: http://www.statista.com/statistics/266201/us-market-share-of-leading-internet-video-portals/
Vimeo. (2015a). Vimeo. Opgeroepen op September 22, 2015, van Vimeo: https://vimeo.com/about
YouTube Press. (2015). YouTube Statistics. Opgeroepen op September 20, 2015, van YouTube: https://www.youtube.com/yt/press/statistics.html