Google, with a market capitalization of $129 billion and cash and marketable securities of $9.8 billion, acquired YouTube for $1.6 billion. A Forrester Research analyst said that this price tag is \"expensive but not unreasonable\".
YouTube, an Internet video phenomenon which officially started last December, delivers more than 100 million video clips a day and has about 50 million users worldwide, so purchase price is about $32 user. Despite the millions of people that visit YouTube, it has no profit. It has 46 percent market share, while Google has only a 10 percent, and MySpace 23 percent. YouTube understood better than Google and others that it was not about the video, it\'s about creating a community around the video.
But YouTube is also facing possible legal challenges over unauthorized posting and sharing of video. Some in the industry have compared YouTube to Napster (see story below). Other companies had also expressed interest in YouTube. Microsoft, Viacom and News Corporation had all visited YouTube\'s headquarters in San Mateo, California.
Freemium, the successful idea of web products given away for free
The strategy of offering free web services with a premium component has become pretty common on the Internet, and Venture Capitalist have coined a term for it: freemium. Take for example Blogger, Flickr, MySpace, Game Trust, MySQL, Jajah and Skype. Note that this is different from YouTube, Google or AOL, companies that support their free product with advertising.
One big advantage of freemium is that the product adoption frame time is reduced since Web-based user who don\'t have to pay for it will often start evangelizing the benefits to others (as we did last week when we discovered Jajah.com free phone calling service). A key point when dealing with premium component is to identify quickly a range of revenue sources, making sure that it this paid service soon covers the cost of the free service.
Jumpcut.com, a cool video online editing company, bought by Yahoo!
Yahoo has purchased, for an undisclosed sum, Jumpcut.com, a cool video sharing site that allows to edit and remix movies right in the browser. Jumpcut.com pioneered online video editing technology enabling anyone to become a creator. It works in a simple way: you upload your clips, photos and music, and you find those files on a section called My Stuff; you can get them from there and edit them to tell a story.
\"Yahoo! has a reputation for supporting the vision of its companies and we\'re happy to join Flickr and Del.icio.us as leading social media companies within the Yahoo! family!\", said Jumpcut on its blog.
YouTube\'s play: negotiate with Hollywood while prepares to sell off
YouTube.com, the video site that opened to the public a year ago and shows more than 100 million video clips a day, one-third of the U.S. Web video audience, three times that of Google, continues to find arrangements that could satisfy Hollywood and could avoid to be sued for infringing copyright law. YouTube has become the largest archive of video taken without permission from television shows and movies, and home movies constructed with commercial music.
Mark Cuban, who founded Broadcast.com and then sold it to Yahoo, says that YouTube does not have a viable business other than piracy. \"It is absolutely reminiscent of Napster\", adds. \"Only a moron would purchase it\". Doug Morris, the CEO of Universal Music Group, said that YouTube and MySpace \"are copyright infringers and owe us tens of millions of dollars\".
Recently YouTube signed a complex deal with Warner Music that he hopes will be a model for dealing with big studios and record companies. It intends to share some of its advertising revenue with Warner when copyrighted material is used. However, now YouTube does not have much advertising revenue, as it rejects inserting commercials in front of video segment. It displays graphical banners and text ads, but say it is developing more engaging advertising formats.
Chad Hurley, YouTube\'s CEO, a 29 years old former graphic designer at PayPal, who got funding and strong support from Sequoia Capital (the powerful VC who backed Yahoo, Google and others), relies, along with his partner Steve Chen, a former PayPal engineer, on the Digital Millennium Copyright Act, which does not require Internet companies to screen material they store in advance, and only forces to remove content when a copyright holder informs them of a violation.
Some say their strategy is to grow rapidly before cutting an advantageous deal taking advantage of having the largest video audience on the Internet.
IPTV brought to sep-top boxes and the PC becomes a profitable market
Interactive Television Network (ITVN) and Communications Technologies are two of the most prominent newcomers planning to experiment with IPTV programming or narrowcasting, as some call it. This type of specialized video programming is generally not available on mainstream cable or satellite services, and it can be viewed on PC\'s with broadband connections or TV with Internet-enabled set-top boxes.
Those programs include niche sports broadcast, lifestyle reports, interactive karaoke videos, live coverage of local government or detailed information about troops abroad. The companies offering content don\'t have to pay for part of the broadcast spectrum to carry their programming. Their largest costs go to buying Internet bandwidth, compressing the video, storing the files, marketing and billing. They reach agreements with content owners.
ITVN explains that his company\'s narrowcasts are aimed at groups of 50,000 to 250,000 people linked by a common interest or demographic. It has developed channels like the Karaoke Channel and LacrosseTV, launched with the National Lacrosse League, which has a fan base of roughly 150,000 people. This programming, which costs $9.95 a month, includes live broadcasts, features on teams and game archives. The set-box is provided free to subscribers.
One of its biggest channels is being developed in association with the Department of Defense. It will cover all the things going on abroad in the military.
Another next channel GoGovTV.com, promoted by Communications Technologies, a broadband network provider in Chantilly, Va, founded by a former Bell Laboratories scientist, will be used for interactive town meetings or broadcasting school concerts. It will cost state and local governments $75 half hour to offer programming to an unlimited audience. Its delivery technology will have interactive elements like polls, voice and other web capabilities. It should go live in October or November.
Last year the number of IPTV (Internet Protocol Television) in North Americas reached 300,000, and it is expected to rise to 1 million by the end of 2006, according to Infonetics Research.
According to some tech watchers, the $1,65 billion purchase of YouTube by the giant Google marks the dawn of the new Internet age: Web 2.0, that is, a concept coined by the expert John Battelle to define the generation of user centered, Web-based product and services.
Even Google CEO Eric Schmidt, who recently called Web 2.0 a \"marketing term\", has just recognized: \"It\'s really happening\". Corporate America is stunned with this transaction, and from now it seems unthinkable that a startup seeking funding does not use the term Web 2.0 somewhere in its publicity materials.
Chad and Steve, the billionaires of YouTube, are the new stars
Do you know what is the most viewed video this week on YouTube with more than 1,7 million views? The message from Chad and Steve, the founders of YouTube who hit the year\'s jackpot.
As interesting at this post, which a new way to spread a news story, are the comments of the user, mostly critical. See also how people laugh at them.
Paid downloads and ad-supported streaming video, the big winners
When trying to monetize the online TV projects, ad-supported streaming and pay-to-play downloading are proving themselves to be the leading avenues. Newer platforms like podcasting and IPTV, while promising, still need more time to mature as technologies and business models, and also for their audiences to reach critical mass. The mobile phone space is the platform with the most immediate ability to be profitable.
Great enthusiasm with ad dollars are moving online, but still a long way
Todd Herman, director of MSN says: \"When we started MSN Video a couple years ago, we had four or five advertisers. We now have 60 of the top 100 television brands. We\'ve seen three years in a row of 400 % increases in revenue\". There is a remarkable enthusiasm in the streaming sector, but there is still a long way to go before it can mount any serious challenge to TV.
Traditional TV still has 45% of all ad dollars while online has just 5%. The fact is that viable business models, sufficient broadband penetration, and proven enabled technologies are only months old.
NBC.com hits two million streams in first week
NBC.com is having a big success with its new feature called NBC Rewind, which consists on free full-episodes, displayed on a large-format video player. Two million streams served in first week and an average time spent per visit clocked at 20.2 minutes.
\"It\'s further evidence that a strong digital presence is vital to satisfy today\'s audience and to expose our new shows to more potential viewers,\" says Jeff Gaspin, President of NBC Universal Cable Entertainment. In September, NBC announced its plans to stream primetime content on nbc.com for free (in an ad-supported model) beginning with the new Fall season\'s programming.
CBS Evening News \'not different enough\' to change viewing habits
Remember all the buzz around Katie Couric? Well, the CBS Evening News with Katie Couric is now, only five weeks after her debut, third place in the ratings. Her show is not different enough, and the ratings have dropped since week one, from 13.6 million in her first night to an average 7.04 million last week. NBC\'s Nightly News with Brian Williams continues to be number 1, with 8.54 million total viewers.
\"Although she is doing a fine job, her presentation is not different enough, young enough, radical enough a departure from the show before Couric to change American viewing habits,\" says Paul Lewison, professor and media expert at Fordham University.
Video-sharing websites with an editorial viewpoint will be more successful
Another major model for video-sharing websites quite different from YouTube is based on having an editorial viewpoint, much in the same way a newspaper or magazine has an editorial viewpoint. Because having a giant database of video content is great, but in order to have an engaged audience and generate ad revenue, we need to be more vertically focused.
How? Providing content that is much more appropriate to either a single demographic group or a single social group. For that, you can have a small group of editorial volunteers that makes the content decisions for the larger community. The editorial voice is here their brand.
Some experts believe that sites with editorial filters will be more successful in the long run. Nielsen/NetRating\'s analyst Jon Gibs, senior director of media, says that \"if you have a focused concept that is important to users, then you have a really engaged audience that is very targeted, and that\'s important to advertisers.\"
Video content over the Internet in China as a way to avoid regulations
MTV Networks and China\'s biggest portal Baidu.com have struck a deal to introduce American television and entertainment into China over the Internet. Western media companies, including Viacom\'s MTV Network, have struggled to get their programming onto television in China, and they have often been frustrated by new regulations, restrictions, delays and other hurdles.
Viewers of Baidu.com will pay a fee to download the content and there will also be advertising linked to the content.
What about the legal exposure of Google after YouTube accquisition?
Responding to the deal by Google to buy YouTube, Yahoo\'s CEO Terry S. Semel said this week he did not regret not buying the company. \"I came out with a grave concern about how severe the copyright violations could be. It could be a gnarly problem if lawsuits come. And I did not want to put my company in this type of risk.\"
Connected with this, YouTube has deleted 30,000 clips that violate Japanese copyright laws, following the request from a group representing Japan\'s entertainment industry.
Eric Schmidt, Google’s chief executive officer, responding to the question about possible increased legal exposure due to the YouTube acquisition, says: “We’re relying on the Digital Millennium Copyright Act as it is being imposed by law. There are not a lot of shades of gray in how it works. If you operate under this, companies have safe harbor. We do our very best to implement it as it is prescribed… It’s the law of the land and we absolutely operate by it.”
CBS strikes strategic alliance with YouTube and launches a new channel
CBS has launched a channel on YouTube with clips from CBS News, David Letterman, CSI, NCIS and CBS Sportsline. YouTube and CBS will share revenue from advertising sponsorships of CBS Videos.
Press release says: \"CBS is the first TV network to test YouTube’s new advanced content identification architecture and reporting system which will allow CBS to protect its intellectual property by identifying and locating copyrighted CBS content on YouTube. CBS will then have the opportunity to either remove it from the site or, at CBS’s sole discretion, allow it to remain. If CBS allows the content to remain on the site, CBS will share in any revenue from advertising placed adjacent to the content.\"
Marketing plans are including blogs, as a way generate buzz on products
Many corporations are starting to include blogs in their marketing plans. They are increasingly conscious of the power, and potential pitfalls, of blogging. A favorable review from an influential blogger can help generate the kind of buzz around a new product, and a negative write-up can help doom a product before it even hits the market.
For that, American brands send to the bloggers their products by the time of its official introduction. Peter Hirshberg, CEO of Technorati, a blog-tracking service, says that \"a year ago, brands were saying, oh no, not the blogosphere, and now they are saying, great this is an opportunity\".
A sign of the times is also that now the Edelman public relations firm is sponsoring development of new Technorati sites in French, German, Italian, Korean and Chinese, involving an investment of several hundred dollars. For the record, there are more than 55 million of blogs in the world.
After the recent acquisition of YouTube by Google, start-ups specializing in Internet video content are finding new niches. One who is trying to get off the ground is the Manhattan-based company Blip.tv.
This company has manage to differentiate itself from video-sharing sites. Blip.tv is designed for online TV shows that are filmed, uploaded, and watched regularly. For example, the Rocketboom former host Amanda Congdon has her own show.
Ad support business model
This start-up has a business model based on ad support, but has yet to launch its service in full. Blip members who participate in an opt-in advertising program will receive a share of the revenue. Also, Blip develops software: they struck a deal with CNN to empower its I-Report citizen journalism site.
Some experts say that it is impossible to tell which of these Web 2.0 startups (these days popping up like mushrooms) will be survivors. According to them, Blip.tv has some potential.
YouTube forced by Comedy Central to remove their popular clips
Comedy Central, a Viacom unit, haven\'t had an issue with YouTube before the Google acquisition. YouTube has been thriving with Comedy Central content, probably the most widespread TV brand on the site.
Cisco promises a unique in-person video communication experience
Cisco Systems has launched a new technology for virtual communications called TelePresence, a high quality, two-way video and audio that can change deeply remote collaborations (Watch their promo clip).
Cisco TelePresence, featured \"as if you are there\" technology is focusing in global corporations, governments and organizations that need to stay in touch with employees, partners and customers. By July 2007 Cisco will have deployed this technology in 110 of its own worldwide offices.
IP phone, hi-def video and 65-inch plasma TV
\"Cisco TelePresence Meeting, uses extremely high-definition video and audio technologies, including 65-inch life-size plasma TV screens, sophisticated spatial audio, and advanced cameras that provide eye-to-eye contact. And participants can easily perceive the subtlest facial and body expressions of their counterparts,\" a press release says.
\"We have given a taste of this system to top executives from over 200 major corporations, as well as President Bush, British Prime Minister Tony Blair, and the Governor of California, Arnold Schwarzenegger. They have all said the same thing: this will profoundly change the way people communicate.\"
An exclusive one minute news video for the web twice a day on FoxNews
Fox News Channel is experimenting with a twice-daily one minute web video segment called Fox News Flash. The idea is to produce a short, less than a minute, web-only news updated.
The videos are accessible on FoxNews.com and MySpace.com, a property of News Corporation. \"This has been a Fox News digital media exclusive,\" the video says at the end.
The video sites are an investment, not an expense
Please consider for one second what Steve Safran, a web industry expert writes this week about the multimedia sites and the traditional TV. Many TV stations are spending a ton of money to go hi-def, and nobody is asking them about the return. They only follow the FCC mandatory rule to go digital by 2009.
But the marketplace is demanding stations get serious online right now, and they are plenty of doubts. The web has a big potential and it is a way to understand better audiences. There is money in that.
\"Stop putting the web into the expense column, and start coming up with a five-year business plan that makes it a profit center,\" says Safran. \"You have to stop thinking of the web as an expense. It’s your future.\"