Lefsetz Letter : Mark Cuban/YouTube
Nice rant from Bob Lefsetz (very abusive language though, and ad hominem attack) about why Mark Cuban is wrong to question the potential multibillion dollar valuation of YouTube. As Bob puts it:
“this is the Beatles playing some live gig back in ‘65, with no tapes, no backup singers, no additional musicians in the wings, and they WROTE this hit!
Some Beatleologist might be able to tell me the history of this performance. But I’ve never seen it. And viewing it, I’m jetted back forty years to when music was the most important thing on the planet. It’s this power to affect hearts and minds that’s at the heart of YouTube, not copyright infringement.
It’s not like this footage, and that of other performers all over YouTube, was lost, it’s not like the owners didn’t know they had it. They were just too lazy, or too preoccupied, to exploit it. THAT’S what YouTube has done, shown there’s a MARKET!”
That’s all good, and I agree entirely. Markets create economic opportunity. I have written before about how the BBC is never going to be able to amass the resources to annotate is back catalog without enlisting the help of the masses. People, not machines, are often the best mechanism to add metadata to content.
But there is another angle to the emerging world of a million TV stations. Great content is not just for consumers, but business to business interactions too. Successful brands today have to constantly engage the market. Not once a quarter, or when the next big product launches, but every single day. The content has to be rich, and not feel so much like a traditional ad.
Sun and Microsoft have long created broadcast quality comedy-based material to use at conferences and so on. Now IBM is increasingly getting in on the act.
Note IBM has chosen YouTube as a preferred distribution mechanism for its new media efforts.
I have to say me and Cote were fairly blown away when we looked at the email regarding IBM’s latest SOA announcements (which i can’t tell you about yet because we’re under NDA) and saw a link to YouTube!
SOA – The Movie, Indeed.
Its great to see IBM engaging in playful, up the minute marketing. But there is a wider lesson here. YouTube has an opportunity to become the chosen distribution mechanism for a wide range of corporate content designed for customers, and there is always money in that space.
I am not going to bandy around insults to Mr Cuban – after all, he is the billionaire, and I am just a guy that talks about stuff, but I do feel there are plenty of potential revenue models for YouTube.
Its not so long ago people were saying search was a feature. Well maybe it is, but Google has turned that feature into an unbelievable money maker.
Video content is a feature as well. I, for one, would likely invest in YouTube, even if the evaulation seemed high at first glance. The company has the eyeballs, and a business model will surely follow.
Fred Wilson – who was one of the investors in del.icio.us, has this to say:
“I think that is exactly what Chad Hurley and his co-founders and his financial partners at Sequoia are going to do. None of them need to sell and I think they are all much more eager to figure all of this out the way Google did with search five years ago and reap the much bigger rewards that will come from doing that.”
If you take my thoughts, and Fred’s together- it may be that Google and YouTube will increasingly be in direct competition for advertising spend. I can certainly see YouTube as an ad-supported business, and evidently IBM can too.
Of course, the nature of ads may be changing, but YouTube is arguable closer to what people want from ads (great content) than Google (questionable clicks).
Who ever sent someone else a Google ad link?
Who ever sent someone a YouTube link? One of those scenarios is more viral, isn’t it?
YouTube will likely emerge as a classic Freemium business model. I don’t need to insult Mark to believe that.
Luis Villa says:
October 2, 2006 at 12:38 pm
I don’t see what is defensible about that for YouTube, though. The only edge they have over self-hosted video is (1) willingness to spend VC money on bandwidth and (2) potentially easy-to-create advertising- which surely Google, Yahoo, etc., will all be offering.
To put it another way- clearly you’re right that web video is a billion-dollar business. But it seems to me that there is no reason YouTube will dominate that market in 2-3 years like it does now. They just don’t do anything interesting/unique enough, or sticky/network-effect-y enough, to keep them the dominant player in the long term.
James Governor says:
October 2, 2006 at 12:51 pm
i am not saying google or yahoo or an other won’t purchase YouTube – but that it does have a lot of value, already – without revenues pouring in.
i don’t know about you Luis, but i remember people saying the same thing about Google until quite recently. all Google can do is throw more servers at the problem…. 😉
i think Youtube is already pretty darned viral. many people have sent me links. i can’t say that of any other vido service. obviously i am a self-selecting audience of one, but it tells me something folks are pointing the content my way.
“defensible” – that will depend on the execution, obviously, and the discovery of its own adwords equivalent. But i am not writing them off. someone is going to have to do the capex right?
i actually think iTunes suffers from a defensibility problem, to your point. i can see a scenario where is an also ran in five years.
its all in play – the disruptions are huge. its hard to call the future. but value – there is a lot of value in youtube.
Dennis Howlett says:
October 2, 2006 at 12:51 pm
Funny you should say that. I just included a YouTube in my latest post. Nothing commercial, just a nice piece that helps some friends.
Oh yes – the IBM adds have been watched a total of about 120K times. Assuming they’re not all IBM employees that’s pretty respectable qouldn’t you say?
Luis Villa says:
October 2, 2006 at 1:58 pm
Google has measurably better and more usable search than everyone else, though. I don’t see that YouTube has such an edge right now, and surely any usability edge they have (again, I don’t see one) will vanish when they try to monetize with ads.
iTunes, at this point, has no defensibility problem because it is linked to a very sticky pile of DRM, and to the most popular single piece of hardware in the first world (which they’ve kept other windows software out of so far.) If they’d used open standards (like, say, http, HTML and Flash like some companies I can think of 😉 then I’d agree they’d have a defensibility problem.
(By the way, that Beatles clip… that is illegal, and the labels will come down hard on it at some point, we all know that, right? 🙂
james governor says:
October 2, 2006 at 5:06 pm
luis – regarding apple i think you need to look at mobile phones. far more popular than ipods. FAR FAR more popular.
and the stickiness of Fairplay DRM may prove to be a hindrance not a help, as more and more people begin to realise the limitations of the model they have signed up to. like when they try and play one of the tunes they bought on their cool new phone, for example. i don’t think a tied proprietary service and proprietary hardware architecture can provide long term lock in. i really don’t. note complaints about apple’s hardware quality. note slowing growth there. apple will have a good run – but i am not going to bet on proprietary.
Luis Villa says:
October 2, 2006 at 5:58 pm
luis – regarding apple i think you need to look at mobile phones. far more popular than ipods. FAR FAR more popular.
But not standardized and all from the same vendor- buying ‘a cell phone’ doesn’t guarantee me a specific music vendor and specific software suite; buying an iPod does. (Though it looks like DVD Jon is trying to change that.)
I really wish I could agree about people getting wise to the problems caused by DRM, by the way; I just don’t see it happening outside a handful of the digerati. Far more common is this response.
Phil says:
July 27, 2008 at 8:32 pm
Still, at least the Beatles have finally reached iTunes!
Phil
http://www.fab4beatles.co.uk