Very few people know this, but I remember when MySpace almost killed YouTube. Yes, MySpace.
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.
It's nice to hear of things like this. It's refreshing to remember that even the most successful startups had to go through make or break moments, and that it wasn't all smooth sailing.
It wasn’t just the lawsuits - IIRC YouTube the business was also bleeding money at a terrifying rate thanks to infrastructure costs (servers, bandwidth) even without the legal problems.
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?
It's interesting to look back from a historical point of view and realize that Youtube would've probably been closed down eventually just like Grooveshark, had Google not bought it and put its very best lawyers on the case.
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.
On its own youtube doesn't really make any money. It's only recently that its started to actually champion original content. (as in something approaching a tv station. not just nut shots.)
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)
Nice mea culpa, and a day after the "101 random and mutually exclusive ways we wanted to fix Apple in 1997".
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.
He says Google got 100x their investment since it's 'worth' that multiple of what they paid. I don't think it's a valid argument since they paid real cash and have only a notional value in return. It's hard to see anyone forking over $100bn+ for youtube, and I doubt it's even made enough profit since they bought it to cover what they paid originally paid.
None of this is to particularly criticise either the original post or its followup - it takes courage to call it as you see it and then own up to your mistakes, but it's always worth taking another pass at the figures to see if they really stack up.
>At the time I wrote that post, YouTube was not a real business; [...] 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.
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.
Not to mention he missed by a mile on the valuation estimate.
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 $33 billion by comparison (and is itself carrying a hyper valuation at 100-200 times earnings typically). Netflix is the general ceiling on YouTube's valuation.
I think Jason is overstating Google's risk acceptance with the Youtube acquisition.
"Napster, Kazaa, and countless other media sharing services had been absolutely crushed..." did not happen by being out-litigated. They were over-litigated -- they simply didn't have the capital resources to commit to the legal challenges ahead of them.
Google didn't have that problem. Google was also the darling of Wall Street, Sili Valley, tech culture, etc. which translated to a built-in victory in the court of public opinion. There was certainly legal risk involved, but they had a much more level playing field with the content producers.
> Initially Napster lost the case in the District Court but then appealed to the U.S. Court of Appeals for the Ninth Circuit. Although it was clear that Napster could potentially have commercially significant non-infringing uses, the Ninth Circuit upheld the District Court's decision. Immediately after, the District Court commanded Napster to keep track of the activities of its network and to restrict access to infringing material when informed of that material's location. Napster wasn't able to comply and thus had to close down its service in July 2001
And http://en.wikipedia.org/wiki/Kazaa (not quoting a particular paragraph in this one as the "lawsuit" section is very long covering several countries, but it basically turns to "kazaa lost, started settling with all plaintiffs and agreed to turn into yet another legal music selling service clone").
Very interesting. There is a very good interview with Chad about the wild ride: https://www.youtube.com/watch?v=l56Hw5H-DEI He talks quite a bit about their situation then.
Not many startups go from 0$ 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.
>...of how Google managed to crack the biggest jackpot in business history with AdSense?
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.
IIRC, Google bought AdSense from a kid, and when integrated with their search it finally took off monetarily. Note that AdWords != AdSense either. I've got to admit that most acquisitions I've seen hardly result in an actual revenue increase all that quickly. At least Google is a mixed bag when it acquires as opposed to many others that pretty much as a rule have acquisitions that barely replace the value lost in other lines of business.
Interesting, he wasn't wrong. And while Youtube is something of a 'fixture' today we had Google telling us it still wasn't making any money (although it had reached a point where it wasn't losing money either).
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.
>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.
When Google says YouTube doesn't make any money, they mean net of funding the crap out of it.
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.
"Is youtube profitable?"
Oh yeah, very, it is eating traditional TV alive.
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.
Not particularly "nifty", it's the standard way for centuries. You don't get to sue the Postal Service if someone sends an unlicensed copy of your work through it.
> 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.
As a founder, I dream of having a company that close to the brink of destruction.
Well, I think any experienced programmer could write a reasonable approximation to youtube in a weekend in their basement. So from that point of view, youtube is not really a business. However, as a "brand", it is of course quite strong. It seems to me that we have to come to the sad conclusion that building a business is more and more about building brands and locking in customers (into your ecosystem/social network), and less and less about the actual technology, which is ubiquitous after all.
An experienced programmer can cobble together a moderately buggy, YouTube-esque site which kind-of-works for whatever video formats that can be converted by their local ffmpeg install, and allows a basic commenting system and upvotes/downvotes, running on a handful of servers capable of storing a few terabytes of data.
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.
[+] [-] anthony_franco|11 years ago|reply
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...
[+] [-] ceeK|11 years ago|reply
[+] [-] fzn|11 years ago|reply
Edit: that user was especially thanked by YouTube on the latter IA blog post.
[+] [-] hippich|11 years ago|reply
[+] [-] pja|11 years ago|reply
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?
[+] [-] higherpurpose|11 years ago|reply
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.
[+] [-] KaiserPro|11 years ago|reply
[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)
[+] [-] JacobAldridge|11 years ago|reply
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.
[+] [-] mg1982|11 years ago|reply
[+] [-] logicallee|11 years ago|reply
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.
[+] [-] adventured|11 years ago|reply
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 $33 billion by comparison (and is itself carrying a hyper valuation at 100-200 times earnings typically). Netflix is the general ceiling on YouTube's valuation.
[+] [-] jroseattle|11 years ago|reply
"Napster, Kazaa, and countless other media sharing services had been absolutely crushed..." did not happen by being out-litigated. They were over-litigated -- they simply didn't have the capital resources to commit to the legal challenges ahead of them.
Google didn't have that problem. Google was also the darling of Wall Street, Sili Valley, tech culture, etc. which translated to a built-in victory in the court of public opinion. There was certainly legal risk involved, but they had a much more level playing field with the content producers.
[+] [-] nolok|11 years ago|reply
See http://en.wikipedia.org/wiki/Napster
> Initially Napster lost the case in the District Court but then appealed to the U.S. Court of Appeals for the Ninth Circuit. Although it was clear that Napster could potentially have commercially significant non-infringing uses, the Ninth Circuit upheld the District Court's decision. Immediately after, the District Court commanded Napster to keep track of the activities of its network and to restrict access to infringing material when informed of that material's location. Napster wasn't able to comply and thus had to close down its service in July 2001
And http://en.wikipedia.org/wiki/Kazaa (not quoting a particular paragraph in this one as the "lawsuit" section is very long covering several countries, but it basically turns to "kazaa lost, started settling with all plaintiffs and agreed to turn into yet another legal music selling service clone").
[+] [-] bachback|11 years ago|reply
Not many startups go from 0$ 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.
[+] [-] jasode|11 years ago|reply
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.
[+] [-] devonkim|11 years ago|reply
[+] [-] ChuckMcM|11 years ago|reply
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.
[+] [-] cma|11 years ago|reply
When Google says YouTube doesn't make any money, they mean net of funding the crap out of it.
[+] [-] kazinator|11 years ago|reply
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.
[+] [-] ddorian43|11 years ago|reply
[+] [-] Htsthbjig|11 years ago|reply
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.
[+] [-] jedrek|11 years ago|reply
No.
[+] [-] fx85ms|11 years ago|reply
I truly agree with this on the "disruptive startups" part. Pretty nifty way to avoid all sort of legal troubles, don't you think?
[+] [-] icebraining|11 years ago|reply
[+] [-] skue|11 years ago|reply
As a founder, I dream of having a company that close to the brink of destruction.
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] mhomde|11 years ago|reply
[+] [-] amelius|11 years ago|reply
[+] [-] ajdlinux|11 years ago|reply
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.
[+] [-] bsenftner|11 years ago|reply