Let’s all laugh at my horrible 2006 post: “YouTube is not a real business”
calacanis.com
calacanis.com
YouTube blew up in popularity when everyone was adding videos to their MySpace profiles. And suddenly one day MySpace decided to block all YouTube embeds (they'd occasionally do this with other services as well.)
At the time YouTube was just a small startup without much muscle behind it. All they could do is write a blog post pleading their users to contact MySpace to allow their videos. And it worked, a week later MySpace lifted the ban and it allowed YouTube to reach astronomical growth.
Edit: Here's a link to the blog post mentioned https://web.archive.org/web/20051223152529/http://youtube.co...
Edit: that user was especially thanked by YouTube on the latter IA blog post.
When Google took them on they were able to cut their costs to the bone by using capacity on Google’s internal fibre network which had been bought up cheap after the first dotcom crash & moving the data over to Google’s server infrastructure.
Could anyone else have bought YouTube & managed to turn the business around apart from Google? It seems to me that YouTube was one of those businesses that had negative worth to all except a very few buyers. Did anyone else have the infrastructure knowledge to do what Google was able to do at the time?
Now look what Youtube has become. Can anyone imagine the world now without Youtube or a Youtube-like service?
Who knows what the world could've been if Grooveshark was also acquired by a big company and won its lawsuits. Maybe it would've turned into a major free audio-book platform, or a major podcast platform, or a major indie music artist platform (like how many new artists became popular on Youtube first).
The studios really are innovation killers in their quest to only be paid through the old business models. They only change when they have no choice but to accept the change (like when losing lawsuits against certain companies which they try to shut down). Then they act as if they encouraged that sort of innovation in the first place when they testify in Congress for new copyright laws.
Anyone still remember Turntable.fm? Yeah, they killed that one, too, and I remember it was seen as a highly innovative service.
I would postulate that Google is actually worse for small producers than your traditional record company. At least you could change record company and still distribute material.
If you upload to youtube, you loose exclusive licensing rights. worse still because they own the platform as well, you have no choice but to upload to youtube.
Can you explain more? If a small producer uploads to youtube, they cannot upload to any other platform (eg iTunes)?
However time goes on, and you become successful, and google starts a netflix competitor, because you have granted google a non exclusive license to syndicate your content as you see fit, you don't get to charge more for your media being used to sell a premium service.
Google has the right to federate and syndicate on your behalf. Say you want to create a collection of videos on android in a folio app type thing, charging $1. There is nothing stopping someone else creating a playlist of the same content undercutting your product. Even worse, there is nothing to stop google using your copyright at the original rate, despite charging $1 a play.
The problem comes to negotiation, you can't unless you delete your content, and therefore your revenue stream. You have to play by their rules. You have two choices, take the pennies they throw at you, refuse to take the pennies, but google does what it wants anyway(as they already have a license), or delete the content. There are no other options.
You can turn of embed and syndicate permissions, preventing mobile, web and TV access. You can even unlist the video. Some combination of these would certainly stop anyone other than Google from creating a premium service with your videos.
> Say you want to create a collection of videos on android in a folio app type thing, charging $1.
But if your goal is "folio app type thing", there is no need to use YouTube at all. The whole purpose of YouTube is give your videos exposure and have them mix on a common platform. If you want to hide them, just self-host.
[http://www.quora.com/How-much-money-does-YouTube-make] (granted not the best of sources)
But we need to separate "value" from viable business. Twitter, unless it changes will go bankrupt. Its loosing around $160 million a /Quarter/
Value is a subjective thing, and can be manipulated to suit the needs of others. Earnings are meant to be empiric. If twitter was any other company, its stock would be worthless.
If we take a look at the buisness model of youtube: o Collect all video
o Flog adverts on those videos
o only take down copyright when notified.
o Sign deals to distribute promo material.
o Force small producers into exclusive deals with google at discount rates.
The signal to noise ration of profit making videos to not is terrible. I suspect that 99% of all videos uploaded to youtube are useless and have less than 100views. (https://www.youtube.com/yt/press/en-GB/statistics.html)
Without the backing of an extremely profitable company such as google, youtube would have failed. I'd assume it would have been sued out of existence, and if it didn't it'd have died under the infrastructure bills (they basically have free bandwidth and CDN)
Maybe, but the first statement ("doesn't make any money") and the second ("only recently champions original content") have no logical connection whatsoever.
The could be making (or losing) billions with the existing videos they have. Making or championing "original content" is totally irrelevant to their money-making.
>* I suspect that 99% of all videos uploaded to youtube are useless and have less than 100views. (https://www.youtube.com/yt/press/en-GB/statistics.html)*
They just take disk space then, which is cheap and unimportant.
* Camcorder like footage of friends and family (competition with Facebook).
* Music videos (requires expensive licencing deals, competition with Spotify etc).
* TV/Films (competition with Netflix, Hulu etc).
Youtube has just turned into infrastructure rather than a service or community. It is more like a piece of the OS that is massively useful in a general sense, but not tuned to a particular use. The underlying technology (video that works) is just not special any more.
Without help from Google maybe they would have focused on one market and becoming something different.
Indeed. While most people may not realize until it is too late, my hope is that there are people out there working on plans to rescue large amounts of data from companies that may fail. Whether they be the government, wealthy individuals or organizations such as the Internet Archive, it would be a tragedy if all of this history was lost simply due to the financial failure of the company hosting the service.
I believe the Internet Archive (https://www.archive.org) along with sources such as YouTube, provided they survive, will be considered the most important to get insights into the lives of the common people for future generations.
No doubt obervers, critics, and expert opinions have their place. But never underestimate the man in the arena - especially if you are the man or woman in the arena.
I don't follow this point. How is selling something to Google for $1.6b an indication of being on the brink of destruction? And if the point here is that they were worth a discounted $100b then (so sold undervalued), how can that be the brink of destruction either? Either way I don't follow the author's reasoning here. It sounds like he's saying, "they were REALLY worth a discounted ~$100b, but they were in such dire straits they had to sell for 1.6% of that." But that contradicts his point that it wasn't a 'real' business.
So either way, I don't see how that sentence supports the point he is making.
YouTube isn't worth anywhere near $100b-$150b.
Netflix has a better business model, a track-record of profitability, more revenue and nearly 60 million paying subscribers. It's worth $33 billion by comparison (and is itself carrying a hyper valuation at 100-200 times earnings typically). Netflix is the general ceiling on YouTube's valuation.
What made me remove it is that Google itself is valued at 371B, so the idea that YouTube constitutes 26% of that valuation is something in the realm of what someone could defend. (To compare with your numbers, YouTube.com is the third-most visited site on the planet, after Google.com and Facebook.com [1][2] and has "more than 1 billion users" [3] along with 50% monthly growth according to that page. Since YouTube isn't in the same business as Netflix (VOD), it's hard to use that as a cap on its valuation.)
The author's valuation of YouTube today is probably still inflated by a large multiple. You suggest a cap on YouTube of 8.9% of Google's valuation ($33B), perhaps that's fair, but it's hard to say as it's not an independent business.
[1] http://www.alexa.com/topsites
[2] http://en.wikipedia.org/wiki/List_of_most_popular_websites
"Napster, Kazaa, and countless other media sharing services had been absolutely crushed..." did not happen by being out-litigated. They were over-litigated -- they simply didn't have the capital resources to commit to the legal challenges ahead of them.
Google didn't have that problem. Google was also the darling of Wall Street, Sili Valley, tech culture, etc. which translated to a built-in victory in the court of public opinion. There was certainly legal risk involved, but they had a much more level playing field with the content producers.
See http://en.wikipedia.org/wiki/Napster
> Initially Napster lost the case in the District Court but then appealed to the U.S. Court of Appeals for the Ninth Circuit. Although it was clear that Napster could potentially have commercially significant non-infringing uses, the Ninth Circuit upheld the District Court's decision. Immediately after, the District Court commanded Napster to keep track of the activities of its network and to restrict access to infringing material when informed of that material's location. Napster wasn't able to comply and thus had to close down its service in July 2001
And http://en.wikipedia.org/wiki/Kazaa (not quoting a particular paragraph in this one as the "lawsuit" section is very long covering several countries, but it basically turns to "kazaa lost, started settling with all plaintiffs and agreed to turn into yet another legal music selling service clone").
It's true, they did participate in some lawsuits, but they were going to be overwhelmed by the sheer volume of legal activity (the very purpose of which was to drain them of resources.) Appeals, filings in multiple districts, etc.
Back to Google/Youtube -- Google had the resources to sustain any sort of legal onslaught by the RIAA. In fact, more so as those companies started to see their profits decline steadily during the mid 2000s, and the prospect of winning a protracted legal battle wasn't so certain. As a bully, it's much easier to take the little kids' lunch money, but not so much fun when you encounter a much bigger kid on the playground.
Not many startups go from 0$ to 1.65B$ in 22 months.
Jason did not mention that Google itself was not a real business for a very long time. Are there good writeups of how Google managed to crack the biggest jackpot in business history with AdSense? Sure this experience taught them the lesson which they applied here. In poker terms it's like a draw to the nuts.
To clarify, it was AdWords, not AdSense. AdWords (2000) was the original monetization strategy and is still the #1 contributor to revenue and profits today. AdSense (2003) came later.
It's easy to get AdWords and AdSense mixed up because both brandnames are nondescriptive. Both AdWords & AdSense are based on "keywords" and both "senses" or "tries to make sense of" page content to generate relevant ad links.
Youtube was birthed by business worlds version of Ceasarian Section, basically Google funded the crap out of it invested in datacenters and putting Youtube "pods" in bunches of Colocation facilities around the world etc for a property that doesn't make any money. But what is next for the video service? What business model works where it makes back its money? Does it try to be NetFlix? HBO Go? Comcast?
Does Google start throwing money at "Youtube Studios" to bring original (and with decent production values) content to the web? That is way outside their current comfort zone.
How do they get people to watch and act on advertising they see on Youtube? Because unless they can do that it has to be subcription, and how do you turn the service that everyone knows is "free" into a subscription service?
That is why I don't think it was wrong in 2006 or in 2015 to wonder if YouTube is a "real" business, I don't think we know yet.
When Google says YouTube doesn't make any money, they mean net of funding the crap out of it.
https://news.ycombinator.com/item?id=9437641
It's a HN submission about a blog post, and that blog post is is about (a reaction to) the previous submission, which is about a previous blog post by the same blogger.
In Europe Governments want to intervene because it is taking so much money from their tv companies, and sending good jobs and money abroad.
"If search-engine-ad-$ go puff, does it stay up or go down?"
And if a meteorite crashes in the Earth?, or a big megaexplossion on the Universe sends cosmic rays to the planet?
If nothing like this happens, there will be markets that grow, like TV from the Internet, and markets that recess, like traditional TVs. Early adopters use to benefit from growth in their markets.
Its also not eating traditional TV. You don't sit down to watch a series on youtube. There is no such thing as longform youtube. There are no profitable 30minute episodic videos on youtube that aren't pirated.
Content is king, and if you are producing shit content (cough 90% of the US TV market) saturated with adverts and repetition, users don't turn to youtube, they turn to netflix.
Netflix will eat all, Youtube is, and unless something changes (like no user uploads) will always be a subsidised media charity store.
Yes, its cornered the MTV music video and nutshot compilation market. It has enabled niche video makers for things like hobbies and such. but there is literally no money in that either.
Minecraft UHC (ultra hardcore) competitions are one example of longform youtube series. Each episode is 20 to 30 minutes; you'd probably watch a couple of different people.
I assume bigger channels make money from doing it.
I'm currently watching LapisDemon (associated with the now broken ZipKrowd server) and Xisuma (Hermitcraft) playing as a team and I dip in and out of other viewpoints.
This definitely reduces the amount of telly I watch.
To an outsider performing random searches, it would seem our civilization is based on games, guns, fingernail polish and BDSM.
If you like watching Minecraft it's great - there are thousands of hours on YouTube.
FWIW Once you start watching something YT tends to recommend more of the same.
Watching this "World's smallest v12 engine" video leads me to more engine engineering videos, no Minecraft in sight. https://www.youtube.com/watch?v=m3KdpzL3Hkk
By episodic TV I mean drama, comedy, traditional TV format. Stuff that people are prepared to pay for (see netflix et al.)
Broadcasting sports is super cheap, and has little value for anything other than tier 1 events. (the expense is the rights management, something that games broadcasting has yet to really encounter.) Also note that like I said, its a niche thing, which limits its profitability. Niches always exist.
Also note the profitable. Channel4 in the UK used to deliver its catchup TV via youtube. Despite the heavy promoting it failed to get more than a few hundred thousand views across the entire library.
I'm not sure what you mean by this sentence. Are you really suggesting that there aren't people / companies that make money with longform, original Youtube content? Or are you missing a "high quality scripted fiction" in there?
If not, here are a couple of episode lengths of shows I watch on regular basis:
* TableTop: 30-45min * Day9TV: 90min (!) * Nobbel87 lore videos: 20-30min
Niche content? Yes. But in all three cases it's their primary occupation. So those are profitable, longform Youtube videos. And they are far from the only ones.
The thing that is killing traditional TV is netflix and the like.
Its not even the case that Tv series start on youtube and graduate to TV/netflix. The personalities do, but I'm struggling for a show that has. Not even "zoella" has managed it. the most she's managed is an advert.
You are right that content produced for Youtube does not in general replace scripted drama/comedy. But that is only a tiny part of traditional TV.
The European Government is planning to intervene, to stop Google putting paid adds into the search results, masquerading those adds as search results.
They also are claiming Google is fudging the actual search results by moving non add-paying competitors to the lower pages of the search.
Eating/destroying does not imply profitable. Look at streaming vs. the music industry, for example.
I would argue that all the changes that Google has been making to YouTube show that it, in fact, isn't particularly profitable.
No.
In another form, if youtube is separated from google, is it profitable ? Can it?
I truly agree with this on the "disruptive startups" part. Pretty nifty way to avoid all sort of legal troubles, don't you think?
As a founder, I dream of having a company that close to the brink of destruction.
YouTube, on the other hand, stores so much video that they can't actually tell you how much storage they have online at any one time. They have to process 300 hours of newly-uploaded video per minute, which they then have to serve up to millions of simultaneous visitors through a network of data centres with many thousands of servers spread around the world. On top of this, they have to deal with analytics, advertising, account management, copyright compliance, and everything else they have to do, on the huge scale on which they operate.
That's not a minor technical achievement.
Don't look at the situation today (or even 3 months post launch) to see what a youtube like MVP could look like.
That goes for all web start-ups. An MVP can be duct-taped together but for major scaling you'll need to have all your ducks in a row. But that's fine and totally expected. It would be entirely wrong to build your MVP using the tools you'd use to scale through 6 orders of magnitude, your competitor would be able to cycle much quicker in the first 6 months or so which is when you'll be adapting to market, business model and opportunities suggested as feedback from early adopters. If you're going to do that with a fine-tuned crazy scalable solution you'll simply be dead.