Lessons learned from YouTube
Cory Bergman October 9th, 2006
It’s hard to describe the magnitude of today’s YouTube deal, not in financial terms but as further evidence that traditional television still doesn’t get it. How it is that Apple and now Google have become the destinations and marketplaces for video on the web? They’re the new networks using the same currency — video — as TV has for years. It’s because they’ve not been constrained by old media thinking. The level of naysaying that continued up to the final hour of the Google-YouTube deal proves my point. First it was “who would ever watch stupid clips online?” Then “they’ll never make money” and finally “they’ll get sued out of business.” The networks wrote cease-and-desist letters, then weeks later started posting video on the site. In Apple’s case, it was “who wants to pay to watch TV shows on a PC or a tiny iPod?” Lots of people. It’s not about control, it’s about choice. It’s not about mass, it’s about niche. It’s not about publishing, but facilitating and connecting. It’s not about us, it’s about the user. “The thing that tipped us over was not the great business success of YouTube,” Google CEO Eric Schmidt said today. “But in fact the vision of serving their end users.” While traditional media scrambles to protect and incrementally improve its bottom line, companies like YouTube, Google and Apple are pursuing new opportunities focused on the user. And that’s what sets them apart.
26 Comments Add your own
1. Safran | October 9th, 2006 at 3:51 pm
Amen, Brother Cory.
Look for more video acquisitions to follow.
2. adm | October 9th, 2006 at 4:14 pm
Also interesting that YouTube was doing more or less the same thing as Napster (i.e., providing easy access to copyrighted content), but instead of getting sued into oblivion, they got a billion and a half dollars. Amazing.
Now that YouTube has some very deep pockets, will the lawsuits commence? Or will Google’s deal-brokering outpace the litigation?
3. thedetroitchannel | October 9th, 2006 at 4:37 pm
all that coin and not even a mention of it on google’s homepage.
it’s not like there’s no room for it there .
4. synthetron | October 9th, 2006 at 6:02 pm
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5. Frank Catalano | October 9th, 2006 at 7:06 pm
Good grief, Cory. Rent a tent and put your hands on the video feed!
YouTube has NO business model or revenue stream to justify that kind of price. It has lots of eyeballs. Now, Google is good at turning eyeballs into advertising dollars. So that’s positive, but hardly earthshattering.
The magnitude of today’s deal is that Google is buying eyeballs — and a way to salvage Google Video.You undercut even your own argument that “traditional television doesn’t get it” by saying, in the same post, that then the networks, after first balking and threatening, “started posting video on the site.” That tells me someone in traditional television gets it (but perhaps not the lawyers, ever).
Remember it was dot-com darling Mark Cuban who said it would be a moronic move. He’s hardly a traditional network TV exec.
There’s a little too much religion about this.
6. Charles | October 9th, 2006 at 7:29 pm
Between Google and CBS, YouTube just got some great sponsors. But will that translate into a continued dominance on the web? For every Yahoo!, there’s a Google that pops up. Right now, we have YouTube, but we don’t have a clear “Google” to YouTube’s Yahoo!.
Google bought the over-priced YouTube with money from it’s rideculously priced stock to compensate for a amatuer, ill-conceived Google Video. It’s hardly a victory for the internet. It’s more like a victory for rich people liking to buy ridecously expensive items.
7. Z | October 10th, 2006 at 4:11 am
I’m with Frank. Kudos to the YouTube guys for knowing when to sell, though.
8. thedetroitchannel | October 10th, 2006 at 5:20 am
one has to wonder if it was the right time to sell.
1650 million dollars is a lot of money, but does it not set a precedent by which others will want to be valued in the future?
when news bought myspace for 1/3 that amount people were saying they were crazy.
i guess we’ll have to wait and see if 1.65 in the hand is worth 2 in the bush.
9. Cory Bergman | October 10th, 2006 at 7:03 am
My point is that TV networks and local TV stations have done nothing to innovate any new technology that does anything more than broadcast their video online.
YouTube has empowered people to upload and share in a social network, and then even post video directly inside their blogs in a single stroke.
It’s that philosophical difference — that anyone can produce video, not just TV people — that is the fundamental miss for television. You prove my point by saying that TV networks started uploading video. Yeah, to promote THEMSELVES.
Google will be very successful with YouTube, mark my words. Will it get sued? Likely. But ultimately it will be a big success.
And don\’t rap me for preaching, because TV needs it thrown in their face before they listen.
10. Rob Hyndman | October 10th, 2006 at 8:03 am
“The level of naysaying that continued up to the final hour of the Google-YouTube deal proves my point.”
Cory, scepticism about the deal “proves” no such thing. There are many out there who pine for a new age in media delivery but who think YouTube hasn’t figured out the alchemy yet. They’re not the enemy; they’re just not fanboys.
We speak in all caps and grand concepts, too. We’re just more sceptical than you are about whether this is it. People were saying the same thing 5 years ago.
11. Dave | October 10th, 2006 at 8:27 am
I think we can all come to the conclusion that we’re in a transition period right now.
Problem is, no one is really redefining the local TV business model either. They’re all doing a few things here or there to step into the net world, but most of them don’t have the resources to “innovate” technology.
Cory is correct; although, I think you need to settle a bit man. People will come around. In the end, it’s just TV. Not the cure for cancer or solution to poverty in Africa. Let it go.
My view is simply this: Single product, network-affialiated, business models will have to evolve because the networks are going to dump the affiliates for better opportunities down the road, and we can see that single product (IE local news) is not as big of a money maker as it used to be nor does it deliver the demographics more and more advertisers are wanting.
12. robb montgomery - CEO | October 10th, 2006 at 10:29 am
Overall I think you have to look at yesterday’s Google YouTube merger as an emerging business model.
Google has the advertising pool and infrastructure to monetize Web pages and YouTube delivers the kind of content many advertisers want, young, smart, creative and with pocket money and spare time to spend.
Neither company went into business to become media concerns but they is what they keenly decided they had become and are leveraging their ability to deliver a tightly-focused audience to people who want to pay to be in front of them.
13. Gary | October 10th, 2006 at 10:46 am
People could leave YouTube as quickly as they came to it. Compare Napster’s audience before and after the change. If YouTube starts to lose content, gain ads, and charge $, goodbye eyeballs.
14. Safran | October 10th, 2006 at 11:22 am
I have no problem with skeptics. Hell, I am one. A good journalist should be skeptical. But let’s face it - there is an element of prediction in all of this, so the money’s not on the money, so to speak. The conversation coming out of this is what Cory points to - the future of online video.
YouTube is NOT Napster. Say it again. Take all the copyrighted video down from YT and you have… YT.
Combine millions of user-generated videos with Google’s contextual ads and you have a winner. Period. And it’s a winner that conventional media would never, ever have considered. (And, frankly, probably still wouldn’t.)
So whether it’s financially prudent or not (and I strongly believe it is), the real Earth-shattering point here is the combination of UGC and Google Ads. Total winner.
15. Cory | October 10th, 2006 at 11:27 am
You’ll have to pardon me if I’m a little passionate about this space. I was the first to dedicate a site to it.
So, let it go? Settle? No chance.
Cory
16. Gary | October 10th, 2006 at 12:21 pm
Now if YouTube could live off user-generated videos, would they really be scrambling to make all these deals with big media? A quick look at the most popular videos on YouTube (worldtv.com) will tell you that copyrighted video is an integral part of the service.
User-generated video is definitely part of the future of online video. But people are going to want more than just that from any video service they devote their time and (eventually) money to.
Google/YouTube could make this work if they figure out how to monetize without too much intrusion. Any ads within the video are likely to be too intrusive. Micropayments per video and/or low monthly subscriptions (less than $5) might do the trick. Oh, and they will need to eventually get themselves piped directly to the TV.
17. thedetroitchannel | October 10th, 2006 at 12:39 pm
“piped directly to the tv”?
welcome to the several million channel universe.
18. Joel | October 10th, 2006 at 1:17 pm
This is the beginning of the end for Google in my opinion. Time will tell.
19. Dave | October 10th, 2006 at 1:23 pm
I understand your passion… but for your health, wellness, and stress level… I’m saying at least, let some of it go. You cannot control people. If people don’t get this stuff… that’s their problem.
The steam engine was developed 100 years before it was widely adopted because the rowing guilds banded together to destroy it. They used fire. The current folks use lawyers.
In the end, change will happen and no single person can control it. Enjoy the ride. You’re a smart person Cory and we’re all brighter because of you. Just don’t let it get you down. Stay passionate but stay positive.
LostRemote is a key part to the evolution of our industry and media technology in America. You can’t let a debate get you down.
20. Frank Catalano | October 10th, 2006 at 3:30 pm
Cory: Unfortunately, I suspect the people who need to hear what you’re preaching aren’t the ones reading Lost Remote.
Agreed on the point that local and network TV has not innovated in digital media, or even user-generated content (in my day as a fiction writer, we called the analog equivalent “fanzines”). But taking a even bigger picture look, it’s rare for an entrenched or established industry to innovate from within. Once an industry gets big enough and hooked on an established business model, innovation comes from without — and is acquired.
Did you know that not a single must-have toy of the last decade was created inside a major toy company? They were created by outside inventors who sold them to the major toy companies. Did you know that, even a decade ago, Microsoft had a rule that it would not investigate any technology that couldn’t immediately be a $100 million dollar business? That’s why they let startups do their thing and then acquire them when the market follows. There are many other major industries and companies that are not unlike television industry and local and network TV companies in their thinking.
The cool thing that’s happening now is not user-generated content. That’s always been around (see my thought about science-fiction fanzines). It’s the ability to widely distribute user generated content at low cost. Now all it needs is a business model and a decent quality bar that doesn’t depend on relying on, or ripping off, the work of others. That’s already happening with blogs that generate lots of original stuff. Other media forms will likely follow. Otherwise, it may not be sustainable.
21. Cory Bergman | October 10th, 2006 at 4:12 pm
Good points, both Dave and Frank. Thank you.
It’s interesting to note, though, that most media companies — especially local ownership groups — can’t afford to acquire these innovative companies. So what happens to them?
22. Jim | October 10th, 2006 at 4:39 pm
“YouTube is NOT Napster. Say it again. Take all the copyrighted video down from YT and you have… YT.
Combine millions of user-generated videos with Google’s contextual ads and you have a winner.”
I have no argument with the idea that GooTube will generate cashflow with or without the copyrighted content. Post-litigation and after the copyright purge, I think time will prove that Google overpaid.
23. Frank Catalano | October 10th, 2006 at 5:02 pm
As to the local ownership groups who can’t afford to (or won’t) innovate … well, there used to be a lot of regional and local railroads, too.
Not to be harsh. But they’ll have to band together, or become innovative in other ways, leveraging and recombining the innovations of others.
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