Mark Cuban is echoing something I’ve been saying for a while:
“YouTube has gotten so big you are not a standard unless YouTube adopts you.”
Here’s what I wrote earlier today:
With YouTube being part of Google, who has its own ambitions in ad serving and analytics, so it will be a cold day in hell before they open up to third parties who either compete with it or might become acquisition fodder for it. Google is a student of history:
- it itself grew thanks to Yahoo!’s naive decision to feature Google’s search technology on the portal, then the largest site in the world.
- and seeing YouTube grow into the $1.65B beast it did thanks to MySpace’s users embedding all of those YouTube embeds, YouTube isn’t stupid enough to let athird party company grow on its coattails.
Read more in Why Content is a Better Investment Than Technology in Video Content.
There’s obviously another problem here:
YouTube’s parent Google makes $21B a year in revenues, YouTube probably makes $250-500M in annual revenues with about $500-750M in costs, the costs are in fact inconsequential relative to YouTube’s $20B cash hoard and cash flow, but the point is, it will never be material enough for Google to really pause and take notice, and if ever online video grows the way we think it will to create a risk to Google’s bread-and-butter search business, then look out, Google might start to act erratically.
All factors being equal, we think online video will surpass search ads by 2018 as online ads take over television ads by 2021… but with Google’s grip around online video advertising via YouTube, those figures are up in the air.
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Apparently, Yahoo! is looking at making acquisitions in social media and video, says Tech Crunch. According to Yahoo CEO Carol Bartz:
“We are very interested in social, and in video technology,” said Bartz. She was particularly bullish on Web video: “This is just the beginning. The whole video area is so exciting. Video advertising growing four times by 2011.”
Here’s the thing I don’t get:
The online video technology game is extremely risky because
- the leading player, YouTube (one of our distribution partners), commands 50% of the market share and it is owned by the most audacious and profitable online business: Google.
- the second player, Hulu (another one of our distribution partners), is owned by the leading media companies (News Corp., NBC, and now, Disney) and views all technology solutions as the problem, just think of what SONY Pictures’ CEO Michael Lynton said today:
I actually welcome the Sturm und Drang I’ve stirred, because it gives me an opportunity to make a larger point (one which I also made during that panel discussion, though it was not nearly as viral as the sentence above). And my point is this: the major content businesses of the world and the most talented creators of that content — music, newspapers, movies and books — have all been seriously harmed by the Internet.
I think net-net, the Web shrinks traditional media businesses, but it creates an amazing opportunity for new media startups to disrupt TV companies. Yahoo! isn’t a startup, sure, but in online video content, it would be a startup with the reach to hit it out of the park.
Either way, this is why I think (biased, of course) that content gives a better risk/return opportunity than technology in video.
But when it comes to Yahoo!, what is even stranger, frankly, is that the company’s history of video technology acquisitions have been suspect at best, Maven, which it bought for $160M, is rumored to be discontinued.
Meanwhile, its content forays were misses at a time when online video advertising was non-existent, let alone embryonic. It was also based on an old media approach, which is doomed to fail online.
If Yahoo! approached content the right way, it can make a killing. Think about it, Bebo fetched a premium when it sold to AOL not because it was yet another social network, but because it was positioned a social content portal:
During her time there, Joanna Shields re-positioned Bebo as a social content portal, instead of a social network, making it more attractive to an old media buyer.
Let’s see: Yahoo!’s attempt at social have trailed everyone. It knows content. And when it comes to being a portal, well, it remains king.
But it’s not just Bebo or Shields. Why do you think Tim Armstrong left Google for AOL? Not just the CEO gig, I think he probably thought social media was overrated, too, and thought AOL was on the right track with its Media Glow (content) unit. Of course, I am guessing… but the man who madea fortune in search thinks content is the next big thing?
I don’t know, but I think Yahoo!’s differentiator should not be in social (Mesh, anyone? How about 360!) but in serving up content that online audiences want.
Hulu became #2 in such a quick time not because of better technology or social media BS, it was the content.
YouTube’s challenge holding on to the throne will be due to content, not a lack of social mojo…
Why can’t anyone recognize this?
Seems obvious. Ms. Bartz seems like a no-nonsense type of person… but to suggest that more social media or video technology represents the holy grail seems a bit off the mark.
Last week online advertising firm Kiptronic was acquired by CDN Limelight Networks for $12M. Now $12M is nothing to sneeze at, but with $7.3M in funding (according to Crunch Base), it’s not quite a home run, either.
In fact, the sale represents the challenge that all video technology platform companies (be it in ad serving or analytics) face: to really scale and becoming meaningful, they need to infiltrate the leading player: YouTube, and the rapidly rising #2: Hulu.
In this case, I imagine Kiptronic felt it was on the outside looking in, and Limelight’s parallel world distribution (via the CDN route) was a viable alternative. I had spoken to Kiptronic in the past and told them that embracing their technology was based on their getting through to YouTube, where we do 40% of our streams (less than most content providers, by the way).
Of course, with YouTube being part of Google, who has its own ambitions in ad serving and analytics, so it will be a cold day in hell before they open up to third parties who either compete with it or might become acquisition fodder for it. Google is a student of history:
- it itself grew thanks to Yahoo!’s naive decision to feature Google’s search technology on the portal, then the largest site in the world.
- and seeing YouTube grow into the $1.65B beast it did thanks to MySpace’s users embedding all of those YouTube embeds, YouTube isn’t stupid enough to let athird party company grow on its coattails.
One of those third parties we work with and root for is Tubemogul. We use their analytics and distribution tools.
Today, TubeMogul announced a series of partnerships with firms like Blip.tv (we use Blip.tv’s amazing video player on our WatchMojo.com property, where we do 3% of our total streams) and DailyMotion (one of our many distribution partners). The two companies will now integrate TubeMogul’s analytics straight into their websites.
We welcome further clarity and transparency in the marketplace, because right now giving advertisers an accurate sense of our total reach of nearly 5M streams per month is challenging.
Taking a step back, I think this reality highlights my belief (albeit biased) that content companies present better investments than technology bets in the video market, for we can tap into YouTube and Hulu’s ecosystem and grow in tandem with at investment levels.
From CEO of Sony Pictures, via HuffPost:
I actually welcome the Sturm und Drang I’ve stirred, because it gives me an opportunity to make a larger point (one which I also made during that panel discussion, though it was not nearly as viral as the sentence above). And my point is this: the major content businesses of the world and the most talented creators of that content — music, newspapers, movies and books — have all been seriously harmed by the Internet.
The list of media companies who are growing disenfranchised with the Web grows each day. Who can blame them?
Fremantle Media and YouTube apparently didn’t see eye to eye, and this explains why Susan Boyle’s millions of streams went unmonetized.
Online media is so advantageous over offline media in that it is trackable, but while “video streams” is an important variable in determining the value of a video (or video library), I think the video’s “shelf-life” is equally important.
If you will produce videos, make sure they remain relevant in 1 or 10 years, cause that’s really when online video advertising will be sizable, otherwise, you will have a library of great content that gets no views anymore and thus, no ancillary revenues.
Mind you, not everyone can or wants to produce timeless videos, it’s more art than science, but so is making money off your content.
This is why traditional media has hitherto put its archives on the Web (think Hulu’s programming - disclaimer: we’re one of the new media producers on Hulu’s deck). But this creates a new challenge: how many people actually want to see a media company’s old stuff? After all, do you really want young audiences and tomorrow’s generation of media consumers to associate you with Mr. T?
I think VCs did a good job of finding successful companies when the Web was all about laying down the foundation, everyone from Cisco to Akamai’s.
Now, I find most successful companies involve entertainment of some kind: after all, people spend 47% of their time consuming content.
VCs mistook entertainment for platforms that enable some form of communications or entertainment. Facebook, after all, is a smashing success, but despite some $500M in funding, an exit is unlikely any time soon.
I don’t think VCs have much expertise in the entertainment space… hence why the VC model is “dying”. After all, if VCs had any exits commensurate the size of their investments, then we would not be having this discussion (and please, don’t use Sarbanes Oxley as an excuse).
