YouTube is not a real business (2006)
calacanis.com
calacanis.com
It's incredible with hindsight that it wasn't obvious - at least not to the author - that you could monetise YouTube by becoming the place to do that.
Not only do things change dramatically, it's so easy to forget how things were before. At the time, Facebook (for me) was all about SuperPokes and Mafia Wars and Poker. No photos, no at-mentions, status updates and sharing news was harder, no share button.
In hindsight I'm actually pretty proud of my 2002 myspace page. I added some css that completely hid their gruesome UI and made it a blank slate that I filled with nice minimal design.
With Facebook you could 'creep' on someone you met at a party, or in your building, class, etc. People shared photos openly.
1. Facebook didn't have any ads for a long time while MySpace was stuffed full of fairly intrusive ads.
2. Facebook didn't allow users to customize the appearance of their profile. Profile customization sounds good in theory, but in practice people end up making some hideous profiles when given too much control over appearance.
I guess the lesson here, as with all sorts of criticisms of early products– Instagram, the first iPhone, and even the Internet itself– is that it's easy to underestimate how much things can change, and how powerful a large audience can be. I'm sure I'm not being nuanced enough there (because sites with large audiences don't always keep them– Digg, MySpace).
Would love to hear some smart thoughts about what we all ought to learn from this sort of thing, so that we (hopefully) don't keep making the same prediction errors over and over again!
Or is it simply inescapable?
The author here calls youtube an ftp site, and in doing so ignores what set youtube apart. Youtube automatically transcoded videos, it played videos in your browser inline with other content, and it was free. All you had to do was make your video small enough to upload and YouTube did the rest. You didn't have to worry about codecs, or hosting, or bandwidth Nichols, or domain registration, or any of that. Previously if you wanted to host a video online you had to optimize the encoding, pay for bandwidth, and worry about compatibility depending on encoding. Then your video would be viewed by a browser plugin, usually as a bare video.
Plus there was a catch-22, if your video got too popular it would cost a ton of money to host. Youtube got rid of all that hassle, and in so doing naturally started to acquire content and users. Once the critical mass network effect kicked in then youtube became the default place to view and post any and all video content. From there it should have been obvious to anyone paying sufficient attention that the quality would only go up, the costs of bandwidth and servers would only go down and with a sufficient number of viewers that some monetization strategy or another was likely to be effective.
People made similar mistakes about tons of new technologies, the commonality is often assuming that the launch state is the end state, and not square one of a massive acceleration in sophistication, features, etc.
Great point. Very often people when people don't understand a business, or dislike it, it seems that they reduce it to its superficial components. Eg "Uber is just private taxis", "Amazon is just an online bookseller", "Twitter is just a microblogging service".
There's usually something more to it than meets the eye, if you're willing to look.
It's funny how fast we forget this. Compare video game videos today to 10 years ago. Someone would make a video, spend five hours uploading it via ftp to a niche video hosting website, link me to that website from a separate forum for the game, then I'd spend 40 minutes downloading a video I'd watch twice. It's downright primitive to what we have today. And it was only a decade ago.
1. Yes, he made the wrong call on Youtube. 2. The habit of making wrong (but still reasonable) calls might be a good one.
My learning from this:
1. Form a view based on the best facts and analysis available at the time. 2. Act on that view. Share it. Be confident. 3. Be ready to change your mind and not worry about having been wrong.
Success is about taking enough good gambles that some pay off. Most people don't let themselves take good gambles, and the value of a few paying off more than pays for a few that don't. If it's not a gamble at all everybody will be doing it.
> Some (U.S. publishers) sent agents to England with orders to grab volumes from bookstalls... and ship them west by fast packet. Copy was then rushed from the dock to the composing room, presses run night and day, and books hurried to the stores or hawked in the streets like hot corn.
One of the most successful pirates was the company that eventually became HarperCollins, now owned by News Corp.
[1] http://www.cnet.com/news/how-piracy-built-the-u-s-publishing...
There's no rule in boxing that you can't hit your opponent in the head, because there's never been a fighter strong enough to reliably kill someone by doing that once or twice. So if you can be that person first, you will be the one to change the game forever.
Makes you wonder how different the future can really be.
If that's true, then Calacanis kinda had a point.
http://www.wsj.com/articles/viewers-dont-add-up-to-profit-fo...
Like any other business, you reinvest profit as long as your growth is accelerating.
In my book, as long as there are customers who are paying money and they're happy with the results, you're a real business. (Would love to hear counterpoint perspectives!)
I'm not sure why he placed so much value on Engadget - thats just a big tech blog. I don't see how he didn't see the potential in YouTube which ultimately carried Googles attempt at social networking - though unlike MySpace, YouTube didn't have a clear second at the time - DailyMotion would be the only I could think of.
Of course, this assumes you're interested in being accurate in your predictions. Lots of people get by great with making faulty predictions, as long as they don't have to bet their own livelihoods on their predictions.
Ironically this has been the constant anti-Apple motto since 2003, and it has been disproven time and again, with cheaper alternatives that would "kill" (the iBook, iPod, iPhone, iPad, Air, etc) failing in the market.
It's not that people don't like cheap, but it's not the be all end all, and it can't be used for certain markets that are driven by other needs (including vanity).
To refine that statement a little– I don't mean that people won't want iPhones and Macbooks and Apple Watches. The latest Macbook looks so amazing, I totally want one!
What I mean is that if two products were IDENTICAL, people would want the cheaper version. The way Apple stays ahead is by ensuring that their products are always better in SOME way (even if it's "just aesthetics" or "just branding"– it translates to real value to the customer.)
This applies more obviously to commodities– say, equally good shaving razors, equally good refrigerators and so on. You're totally right that it's not the be-all-end-all.
The fact that YouTube exists today is a miracle, and you have to really give kudos to the team there, as well as Sequoia and Google, for literally saving this business.
At the time I wrote this YouTube was not a real business, it was a very simple website built off copyright violations with unsustainable legal and bandwidth bills!
The fact that they were forced to sell a business that is now worth $100-150b for $1.6b is a good indication for how close to the brink of destruction they were.
Now, the important lessons here are:
1. Google made a sick, sick bet and won big. ------- Given that Napster, Kazaa and countless other "media sharing" services had been absolutely crushed, it is a true testament to Google's legal and leadership teams that they took this risk. It was not clear that they would win their cases, but they did.
2. Content ID was a brilliant innovation. -------- YouTube was able to calm down many a pissed off media holder when they showed them contentID: "look, we know this is your video so we will shut it down or let you claim it -- and the revenue from it -- for all time! what would you like us to do?" Think of how fucking brilliant that was? That's perhaps the biggest lesson: you can innovate your way out of legal trouble!
3. bloggers have no idea about where things are headed. -------- At the time I wrote this I was literally a nobody. I used to blog with recklessness because, well, I really didn't think people read much of what I wrote. Things have changed a bunch for me, and now that I'm older I actually pull many punches when writing about other founder's companies. the thing I regret most about this post is not me being so fabulously wrong, but the fact that I was a dick to three founders working really hard to battle impossible odds. Sorry to Chad, Steve and Jawed... sincerely.
best @jason
This is the kind of mistake a founder should always watch out for. Like, keep repeating to oneself: people are not like you, people are not like you.
Relatively harmless when we're armchair theorists wondering if the Apple Watch is going to take off or not, but devastating when we make projections about economies, finance, housing prices, etc.
PS: Also, the "anybody can put together the same thing" argument has been used to discredit all sorts of things, hasn't it? Dropbox, Instagram... It reminds me of that joke about Modern art. "It's so simple, I could've done it." "Yeah, but you didn't."
But nobody did, and there's a reason for that.
> In the 1st century AD, Hero of Alexandria described the [aeolipile]
> The aeolipile Hero described is considered to be the first recorded steam engine or reaction steam turbine
"Work with what you know."
"Watching DIGG, Engadget, and MySpace climb in the rankings? Those are real businesses."
There's plenty of posts on HN at least this wrong every day. :-)
Yes.
I'm quite bitter about how the whole thing went down because it completely ruined reddit. As folks from Facebook began to wander outside their confines, one of the first places they usually discovered was digg. digg was like the floodgate that kept all those Facebook people away from the rest of the internet. Once the floodgate broke, they all moved to reddit.
If you look at reddit today, it's a complete cesspool.
Could you be a little more rigorous in your statements? Are you saying that Reddit was great before Digg users migrated? What exactly do you mean by "complete cesspool?"
These days on reddit, you will find on the front page:
reposts;
"dank may-mays";
pictures of someone's kids, relatives or pets;
celebrities who are peddling shit in exchange for the most generic answers on AMA;
advertisements disguised as normal posts (e.g., subreddits of movies, tv, music);
world news posted with a spin to stir outrage by government agencies hiding in military barracks of US and UK and "troll houses" in Petersburg;
and other junk that's posted to appeal to the lowest common denominator.
This is especially true with subreddits that are promoted to default status. It used to be that you could find refuge in other subreddits, but even now, as soon as word spreads of their existence, they too become saturated with the Facebook folk.
The challenge to maintain standards when an audience grows is really hard. There are some subreddits that try, but it seems like a universal problem (as far as I can tell.)