gregword

I usually fight the urge to jump on the bandwagon and comment on the latest thing, but I think it’s instructive to examine the underlying reasons why YouTube sold to Google. The service was insanely popular, but had no business model. Their expenses outstripped their revenues, forcing them to burn through cash. YouTube had no choice but to sell, as without deeper pockets, eventually, they’d have to turn out the lights.

And Google, Yahoo, etc., in some ways, were forced to buy. These guys are all hungry for traffic, users and page views. Without an upfront business model (everyone talks about the new wave of video advertising, but lets face it, there aint much new under the sun), it was inevitable that YouTube would eventually come knocking. And once one of the major players was interested, the other big guys could not afford to ignore it.

It’s a bit ironic, because from a pure business perspective, dollars and cents, YouTube was a failure. But online, value comes in many different colors, not just green, and certainly from the founders and investors perspectives, YouTube is an incredible success. But from a founder perspective, looking at the plan when starting a company, think about how many other video sharing sites there are, and how many of them have even a fraction of YouTubes traffic. You’re better off, statistically, coming up with a service that makes real-world money, than hoping to be the one site that grabs the public attention. There are probably less than seven sites on the web that could work a deal like YouTube did; on the other hand, there’s thousands that are making signficant amounts of real world money. It’s not a bad place to be where YouTube is, but it’s not a simple thing to get there.

As for YouTube itself, well, here’s hoping that it doesn’t become as bland and boring as Google Video.

This entry was posted on Monday, October 9th, 2006 at 5:41 pm and is filed under Advertising, Attention, Business, New Media, Startups, Video, Web 2.0. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.