Net Present Value of a Video

The Net Present Value (NPV) of a video is a theoretical framework that attempts to quantify the total value of a video based on its projected lifetime views. This concept adapts traditional financial NPV calculations to the context of YouTube analytics, helping creators and analysts better understand and predict the long-term performance of content.

Core Concept

Just as financial assets have future cash flows, videos generate future views. These views, however, may have different values depending on when they occur. Early views often carry more weight as they contribute to initial momentum and algorithmic promotion. The NPV concept helps account for this time-value of views.

$NPV$$=$$\sum$$\frac{V_t}{(1+r)^t}$

Where:

  • Vt represents views at time period t
  • r is the discount rate (representing time preference and algorithmic decay)
  • t is the time period (days, weeks, or months)

Methods for Measuring Lifetime Views

1. Historical Decay Analysis

This method analyzes the historical view decay patterns of similar videos to predict future performance. Key components include:

  • Initial 48-hour view velocity
  • Weekly decay rate patterns
  • Long-term baseline views
  • Seasonal fluctuations

2. Category Benchmarking

This approach uses aggregate data from similar videos in the same category to establish viewing patterns and lifetime expectations. Considerations include:

  • Average lifetime views for the content category
  • Topic longevity (evergreen vs. temporal content)
  • Competitive saturation
  • Platform-specific trends

3. Algorithmic Performance Indicators

This method focuses on early engagement metrics that typically predict long-term success:

  • Click-through rate (CTR)
  • Average view duration
  • Engagement rate (likes, comments, shares)
  • Subscriber conversion rate

Different Long Term Video View Patterns

Videos differ greatly in how views accumulate over time. With this in mind, let us look at some of the most common patterns and categories.

The Cyclical Growth

Graph showing relationship between time and quality

The Constant Growth Video

Graph showing relationship between time and quality

The Boom and Bust

Graph showing relationship between time and quality

It is important to note that some videos can be a mix of these three categories. E.g a famous world cup song from 2014 will have high constant growth, but also see cyclical growth every world cup

Measuring the value of a video depends to a large extent on its growth pattern. In a ideal scenario where a video fits perfectly into either of the categories it becomes possible to create various models to estimate future growth.

Constant Growth Videos

  • Autoregressive Integrated Moving Average (ARIMA)
  • Vector Autoregression (VAR)

    • Cyclical Growth

  • Seasonal Autoregressive Integrated Moving Average (SARIMA)

    • Boom and Bust

  • Autoregressive Conditional Heteroskedasticity (ARCH/GARCH)

    • Is there a negative NPV video?

    Arguably, it is possible for video to have a negative Net Present View value. This might intuitively not make much sense, how can posting a video lead to negative views on you channel? Arguably every video posted will have at least 0 views, if not more.

    In order to explain this concept, we argue that while an individual video's present view count can never be negative, since a video cannot have fewer than zero views, posting a video can still have a negative impact on the overall future views of a YouTube channel. In the worst case, a newly uploaded video may lead viewers to unsubscribe or disengage from the channel, ultimately reducing the potential audience for future content.

    For instance, if a video significantly deviates from the type of content the audience expects or is controversial, it may alienate existing subscribers. This could result in fewer recurring viewers, lower engagement rates, and even reduced visibility in YouTube's recommendation algorithm, all of which can negatively affect the channel’s long-term performance. In this sense, while the video itself accrues views, its overall effect on the channel may be detrimental, leading to fewer views across future videos, effectively a "negative view effect" on the channel’s future views.

    Practical Applications

    Understanding the NPV of a video can help creators:

    • Optimize upload timing for maximum initial impact
    • Allocate production resources based on expected lifetime value
    • Identify content types with the highest long-term potential
    • Make informed decisions about content strategy and investment

    Limitations and Considerations

    • Algorithm changes can significantly impact view patterns
    • External factors (trends, news, viral moments) can affect lifetime views
    • Different content types may have different lifecycle patterns
    • Platform changes can affect historical patterns