YouTube is considering building a paid service that would allow customers to skip the ads on videos. This service targets the group who wants to avoid the ads and are willing to pay for this service. The ad-free service is one PoD of YouTube than the general video website. This service could increase the level that consumers satisfaction, increasing the value proposition.

However, will Youtube be profitable with this service? With this service, I think the value of the advertisement before the video itself would be reduced. If the service came out, fewer people would be willing to wait until the ads end; people who buy the service would definitely skip them. As fewer people would see the ads, why firms would choose to put their ads on YouTube’s video. Hence, I think the profit from advertising would be lower.

But volume would win. Since YouTube has a large customer market, the profit from selling the service may cover the loss from reducing advertising investment, or even exceed. As the CBC News reported, the popular online video service has grown to more than one billion users a month with ads paying for the content and the service. This service may be profitable because of its huge market. 

On the other hand, I am not familiar with Canadian online video services, so I do not know whether other websites offer this kind of service. But in China, it is common in the Chinese online video market; almost every online video website provides this service. Therefore, compared to the Chinese market, it is not a point of difference for Chinese consumers. However YouTube does not serve the Chinese market.

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the popular online video service has grown to more than one billion users a month with ads paying for the content and the service. This service may be profitable in its huge market.

http://www.cbc.ca/news/business/youtube-considering-ad-free-subscription-service-1.2815960