Strategies for a discontinuous future.

Tuesday, October 10, 2006
Innovation Wednesdays

Don't forget - Innovation Wednesday get-together tomorrow, same place, same time (7-9pm at Coco Momo, on the corner of Paddington St and Marylebone High St).

Everyone is welcome, bring a friend, etc.

Tomorrow we will be discussing (what else) GoogTube vs deal math, GoogTube vs strategy, GoogTube vs branding, dudeliness, etc...

As always, leave topic suggestions in comments if there's other burning stuff you wanna talk about.

-- umair // 3:42 PM //

Monday, October 09, 2006
Deal Note: Google + YouTube

Why did Google buy YouTube?

Some reasons:

1) Google has to amplify (and protect) it's key revenue stream - ppc. Video ppc is a higher value domain, and a hugely untapped one.

2) Google wants assets at the edges of the value chain which can exert market power against 1.0 publishers - just like it's doing in book search.

The more of these assets it has across media markets, the greater economies of scope it can ultimately realize; the flipside of these scope economies is, of course, the more market power it can exert.

In other words, Google's goal is to redesign a more efficient value chain.

3) Google Video failed miserably.

Further points to note:

1) YouTube realized that to make money (revenue streams, not big fat exits), it would have to be less of pure platform play. It tried shifting to being a network/community, like Myspace.

2) Google has no idea what it takes to make networks/communities productive (ie, the hypersocial, etc, etc).

2.5) Conversely: YouTube has no dude. I don't have time to explain, but hopefully someone (who's been part of the discussions on Wednesdays, where we've been talking about this) can elaborate in comments. And I'm only half-kidding about this point :)

3) Revolutionizing branding is the real play at the heart of all this. Google thinks they are closer now, with YouTube in their back pocket - because they have a platform for experimenting with branded ads.

I think the reverse is likely true: Google has no idea what normal people want (or even are like, if you like), and so a YouTube acq might be just a nice way to geek out, possibly earn a nice marginal revenue stream (a la AdSense/Blogger), but never really redefine the value chain in the way it wants.

4) Deal math - yes, the deal is rich. Especially since YouTube is not as lightweight a business as most others - it is relatively capital intensive, and will stay that way for at least the medium term. Google can scale/scope many of these costs away, certainly.

But basically the math of the deal boils down to this: whether you believe tomorrow's attention is worth 10-20x today's revenues.

Google does - and that in itself is a data point that beancounters across industries will be chewing on for quite a while to come.

Discuss, comment, debate away...

-- umair // 10:08 PM //




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