Okay, I understand why conversion of video formats would be slow at home. But surely sites such as Vimeo can afford custom hardware to do the encoding? I mean at least using GPU computation, and possibly even some custom FPGA hardware and the like?
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Yes you are correct, and they most probalby do that already.
But imagine hundreds of videos that need converting, and I wil tell you what, sometimes I upload the same video three or four times because even though i thought it was nice, I always find something wrong with a transition or sound synchronisation..
One way of managing this process is to keep a queue in place and use the lease amount of processing power.. because allot of data centres charge per killowat..even though you can have 200CPU's and 100GPU's available..
So it would translate into something like this (theoretical and not entire factual or up to date data)
Imagine running 100 computers at your home, do you think your mother will be impressed with a $1000 electricity bill? Neither are the people who have to pay bills for these free servers we use.
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It is slow in order to encourage "basic" account holders to pay for a "plus" account.
They could just rely on making you watch adverts, but it is a commercial decision they have made about how best to provide food, clothing and shelter from rain for the children of Vimeo employees and shareholders. They may be wrong of course, but as they buy the hardware, they get to choose their business model.