web 2 point OH NO!!!11
April 28, 2006 5:41 PM   Subscribe

posted by public at 5:48 PM on April 28, 2006

That $11.5mm comes from Sequoia Capital - not dumb money in the slightest*. Here are their internet portfolio companies.

*That's not to say they won't lose money - I have no idea. Their strategy is to have a few homeruns, not to make money on every investment.
posted by mullacc at 5:56 PM on April 28, 2006

1) Create user-created and quasi-pirate video hosting service.
2) Wait for videos clips and remixes of bad anime, talentless Emo 'taints and skater retards injuring their groinal areas to rise to the top, viewed by millions and millions.
3) ...
4) Completely fail to generate any sort of noticable profit to the great surprise of many, burning through VC funding like an Olympic snowboarder burns BC hydro.
posted by loquacious at 5:59 PM on April 28, 2006

making zero in revenue? the site has Google ads on every page. maybe they're not covering the bandwidth, but that sorta remains to be seen, as the article indicated that they only started selling ads last month...
posted by jonson at 6:01 PM on April 28, 2006

Looking at SC's internet investment track record I doubt if even a third of those companies are profitable. How many of them even have business models which generally involve money moving from customers pockets into their own? Although IANAVC. I think that kind of failure / non-profitable rate is pretty standard among VC firms though. It only takes 1-2 Google/PayPals to finance the investment in all the other random crap.
posted by public at 6:06 PM on April 28, 2006

The Webvan of 2006?

posted by Spacelegoman at 6:06 PM on April 28, 2006

According to Alexa.com, youTube ranks number 44 in overall traffic (23rd highest overall today). It's jumped up 293 places in 3 months. 11 million is nothing. How much did mySpace sell for? 580 million bucks.

I'd invest in youTube in a second.
posted by SweetJesus at 6:19 PM on April 28, 2006

SweetJesus writes "I'd invest in youTube in a second"

Whose money ?
posted by elpapacito at 6:22 PM on April 28, 2006

"In recent years, people's interest in video online has mushroomed, causing companies like [Brightcove], Google, Veoh Networks, YouTube, iFilm and others to race to build superior video offerings and attract advertisers to the fold.

Because the transition from TV to the Web is happening so fast, many of the companies' business models have yet to be ironed out." [source]

Sound familiar? Reminds me of "attracting the eyeballs" strategy of the mid/late-1990s. Granted -- a few sites will prosper -- but under what business model?
posted by ericb at 6:23 PM on April 28, 2006

Whose money ?

Uh, mine... Why, you have some money you want to give me?
posted by SweetJesus at 6:29 PM on April 28, 2006

1. Distribute video for free.
2. ???
3. Profit!
posted by jimmythefish at 6:30 PM on April 28, 2006

I think it's pretty clear that they will move towards video advertising at some point in the future. Their recent upgrade to a new video player seems to be a step in that direction. I actually wrote them an email today praying that they would do 3 things with this advertising model.

1. Content specific advertisements.

2. Advertisements at the end of the video instead of the beginning.

3. Allow websites that are rehosting their video to get a slice of the advertising pie, similar to google adsense.

I think that if they manage to do all of those things the Internet backlash will be mild, and in fact many sites will enjoy hosting YouTube videos for the potential chance to have another income source.
posted by sourbrew at 6:49 PM on April 28, 2006

How long has iFilm been around and how much money has been dumped into that? Cause YouTube has kicked their ass.
posted by smackfu at 7:07 PM on April 28, 2006

what happens when the Copyright Police start going after YT?
posted by ParisParamus at 7:14 PM on April 28, 2006

A few things:

- web advertising could make them boatloads of money. They are quickly becoming the destination site to goof around on the web. And that cuts across all lines, young and old alike, from biggest dork to biggest jock, everyone has something to like about crap on youtube.

- iFilm just got sold to Viacom a few months ago for hundreds of million didn't it?

- Ask any VC with a portfolio of internet companies and they will tell you that 1 in 10 is the industry average for money makers vs. money losers. They make a lot of money even with that low of a success rate. The best VCs might get up to 1 in 3 being profitable.

- I'm sure they will be purchased within a year by an old media company like NBC or Disney or Time Warner, with revenue recaptured through TV show and Movie streaming. YouTube will become the only competitor to the iTunes Movie store.
posted by mathowie at 7:17 PM on April 28, 2006

Paris, they reduced their max length videos to ten minutes, and they will remove any video a copyright holder asks them to remove. It's still a stream first, apologize later sort of thing, but they pull down copyrighted stuff all the time. If I see a link on a blog leading to an old movie or tv show clip, within 24 hrs the movie will be gone.
posted by mathowie at 7:18 PM on April 28, 2006

BC Hydro? Ah, BC Hydro.
posted by Grimgrin at 7:19 PM on April 28, 2006

Well as long as that REM/Muppets video remains, I'm happy!
posted by ParisParamus at 7:21 PM on April 28, 2006

What I really mean is, how much of YouTube's appeal (content) is copyrighted video that shouldn't be there? And what happens when things get a bit less lenient? How much of the content is legally there, and how much is just the law lagging behind the web?
posted by ParisParamus at 7:24 PM on April 28, 2006

The only way they'll make money is if they runn point roll ads in front of the video. The kids will leave en-mass to the ad-free alternative.

Still, interesting to know. I think i can just barely make out the sound of a thousand powerpoint decks from a thousand entrepreneurs-to-be crying out, and then suddenly silenced.
posted by Freen at 7:43 PM on April 28, 2006

I'm waiting for a site that will offer interactive advertisements that will pay you to watch them.

Using something akin to PayPal, if you watch the ad and interact with it, so they know you are watching, you get something in return.

At first, businesses would offer coupons, then maybe free stuff. But finally, for a "full marketing experience", you could get paid as much as someone who is hired in a shopping mall for a detailed marketing survey. That could be from pennies to $25.

In other words, this goes from just watching an advert, to having a one-on-one live chat with a corporate marketer--all in exchange for free stuff and money going direct to you.

By doing this, businesses would actually save a ton of their advertising dollars, get direct, targetted advertisements to the consumers most likely to want their product or service, and get quality customer feedback quickly.

The big money would be if you would identify yourself enough so that they could cross-check your purchases with what you said. If they *know* you regularly buy their product at Wal-Mart, you are the person who gets the big bucks.
posted by kablam at 7:56 PM on April 28, 2006

earlier this week YouTube partnered with the Weinstein Co. to feature the first few minutes of the film "Lucky Number Slevin" on its site.

I'd guess YouTube is being paid for this (although the Hollywood Reporter article I linked above does not say so), and this would certainly seem to be a way they could make quite a bit of money through future deals with other studios.
posted by pruner at 7:59 PM on April 28, 2006

YouTube is not a real business.
posted by dhartung at 8:06 PM on April 28, 2006

Anyone remember Broadcast TV? Heard some dude sold it to Yahoo for billions and bought the Mavericks. Bet he's still laughing...

I don't see what Youtube is doing that can't be easily emulated by a dozen other sites in 3 days. To me they are just like Napster, the first in a long line of imitators trying to outflank the copyright holders until someone figures out how to make legitimate money off of it. Anyone know how Salon.com is doing since they went to to interstitial ads for day passes? That seems to me to be a fair way to go. You want free content, watch this interactive add first. Want to get rid of the ad? Pay a subscription.
posted by any major dude at 8:14 PM on April 28, 2006

YouTube may be offering only free content right now but who's to say they aren't developing some scheme to allow monetization of user-uploaded content? The big push in video content delivery is providing short videos (TV programming and movies) at inexpensive prices. iTunes and Google Video are all competing in this space but YouTube has the largest Internet mindshare for being the repository of homemade and indie videos. They're in a very powerful position to earn revenue over the "long tail" of short, cheap films and periodic programming.

For instance, let's say I'm thinking about making a machinima series like Red vs. Blue and I want to make some money on it. iTunes doesn't take user-submitted content and Google Video has pretty poor video tools and a faulty payment system. And neither has the popularity and audience reach of YouTube. A properly designed payment system and structure could allow YouTube to take a small profit on every video I sell every month, more than enough to cover their bandwidth costs. YouTube wouldn't even need to shut down the free content - the paid content would be sold right alongside it. Hell, I could even market my machinima videos by putting short 5-min clips of each months' video for free on YouTube and then sell the complete episode. At some point, even the TV stations and film studios would be approaching YouTube to sell their video content. Nevermind that Desparate Housewives is already sold through the iTunes Music Store. If YouTube is where the paying customers are, then NBC would be obligated to make their programming available there as well.

On preview: I'm surprised Jason Calacanis was so short-sighted on this. Your Maverick was getting close with this post but he got sidetracked on talking about the downfall of TV programming but failed to get into how the new video companies would become profitable.
posted by junesix at 8:24 PM on April 28, 2006

"I'm waiting for a site that will offer interactive advertisements that will pay you to watch them."

That doesn't sound like a desirable demographic to me. I'd prefer to reach the sort of people who'd pay to see the ads.
posted by Ethereal Bligh at 8:32 PM on April 28, 2006

The Webvan of 2006?

posted by Spacelegoman at 6:06 PM PST on April 28

I totally forgot about Webvan. Hilarious.

I guess you could call this Dot-Com Detritus.
posted by ninjew at 9:32 PM on April 28, 2006

YouTube is the new Napster. The same draconian laws that make a sharpie pen illegal if it is used to "circumvent copyright" will destroy YouTube within the next few years.

Say buh-bye.
posted by Afroblanco at 9:44 PM on April 28, 2006

any major dude: Salon has lost my eyeballs and my dollar. I don't know how they're doing in the greater scheme of things, but I've 'purchased' a grand total of five day-passes since they switched models, mostly because when I'm browsing I want to browse, not ad-sorb-then-browse. Then again, they haven't been themselves since Ambrose Beers left.

Micropayments, aggregated subscriptions with existing services, even kablam's earnvertisement idea is better than another car ad with a stack of "you must click here and here to continue" anti-cheating silliness.

Ads that make me work don't make me want, they make me mad.

As for YouTube, put simply: streaming sucks. It's only worthwhile for 5-10min videos. iTunes has a valuable market in their make-DRM-palatable-with-more-reasonable-licensing model. When I don't have to concern myself with the whims of the bandwidth gods is when YouTube stands a chance in the pay-for-content market.

Me, I'm investing in the hyphenated-compound-noun biz.
posted by abulafa at 10:26 PM on April 28, 2006

So I should be shorting Limelight stock? Because they're either going to lose the revenue when YouTube goes belly-up, or when the company gets bought for bazillions, the new management will go with whoever runs their other multimillion-dollar sites.
posted by Eideteker at 10:45 PM on April 28, 2006

Eideteker: Limelite is a privately held isp. They serve tons of porn, i doubt that youtube is more than 5% of their revenue and 10% of their traffic. (porn hosting generally commands a premium.)

I think youtube will be sucessful if they place in-video ads. They might lose a small group of users (web 2.0 hipsters), but the myspace crowd will continue using (i'm guessing that's 90% of their userbase), as it's just too good a way to host and serve video (for free). The rate for those ads can be as high as $5/impression, so they should be easily able to cover their costs - unless bandwidth rates start going up again (we're already seeing co-lo shortages in major metro areas due to the rash of new VC money and interweb 2.0 companies, and that could eventually bring the average $/mbps up in the next 6-12 months).
posted by jba at 12:40 AM on April 29, 2006

Is there porn on this YouTube thing? Because YouTube + Fleshlight ads = a Fleshlight in every glove compartment = not so many complaints about traffic jams = fewer new highways built = the greening of America!
posted by pracowity at 2:16 AM on April 29, 2006

pracowity -- No nudity on YouTube, even partial. You'd get almost immediately an error message: "Status: Rejected (content inappropriate)". The server would identify tags like "boobs" and alert their censure police. You can have porn, but only with clothes. It's hypocry-puritan even by US standards.

As for their copyrights cops, they are even more efficient. You'd get the following letter in less than a day:

Dear Subscriber:
This is to notify you that we have removed or disabled access to your following material as a result of a third-party notification.
Please Note: Repeat incidents of copyright infringement will result in the deletion of your account and all videos uploaded to that account. In order to avoid future strikes against your account, please delete any videos that you do not own the rights to and refrain from uploading additional videos that infringe on the copyrights of others.
If you elect to send us a counter notice, to be effective it must be a written communication provided to our designated agent that includes substantially the following (please consult your legal counsel or see 17 U.S.C. Section 512(g)(3) to confirm these requirements):
(A) A physical or electronic signature of the subscriber.
(B) Identification of the material that has been removed or to which access has been disabled and the location at which the material appeared before it was removed or access to it was disabled.
(C) A statement under penalty of perjury that the subscriber has a good faith belief that the material was removed or disabled as a result of mistake or misidentification of the material to be removed or disabled.
(D) The subscriberis name, address, and telephone number, and a statement that the subscriber consents to the jurisdiction of Federal District Court for the judicial district in which the address is located, or if the subscriberis address is outside of the United States, for any judicial district in which the service provider may be found, and that the subscriber will accept service of process from the person who provided notification under subsection (c)(1)(C) or an agent of such person.
Such written notice should be sent to our designated agent as follows:
DMCA Complaints
YouTube, Inc.
PO Box 2053
San Mateo, CA 94401
Email: copyright@youtube.com
Please note that under Section 512(f) of the Copyright Act, any person who knowingly materially misrepresents that material or activity was removed or disabled by mistake or misidentification may be subject to liability.
Very truly yours,
YouTube, Inc.

It's clearly intended to be a kind of flickr for videos. But it's not as cool, and their subscribers are more myspace.com crowds than flickr's.
posted by dov at 5:20 AM on April 29, 2006

It's really been youTubefilter around here lately. I give it 2 years total. People never learn about technology or specifically internet, where the VC model is so inefficient) investments. The web 2.0 user-created streaming video market isn't nearly mature enough to do more than gamble as an outsider looking in. That's what VCs are for, of course. youTube will pioneer the niche and die, and someone with much deeper pockets and a mature business model will walk in and take the birthday cake. Once in a blue moon you get an eBay or a Google. The rest of the sector is damn predictable.
posted by fourcheesemac at 5:36 AM on April 29, 2006

What the hell do you do with a million dollars a month? these guys will give you 4000 dedicated servers (3GHz, 1GB RAM, 80GB disk) and 4000TB of bandwidth (300 megabytes of bandwidth for each of 13 million visitors—or, 10 megs each for 90% of the users, and 3 gigs for each of the remaining 10%). I guess it only includes 320TB storage, so maybe that's the problem. Maybe you can get some kind of a a volume discount when you buy 4000 dedicated servers.

Oh, I forgot, you'll need to pay the one programmerfor his work. Once. That probably jacks up the cost.
posted by jepler at 9:26 AM on April 29, 2006

And this is why we need a streaming version of bit torrent. Pirate bay is way better, BTW.
posted by jeffburdges at 9:40 AM on April 29, 2006

I'd prefer to reach the sort of people who'd pay to see the ads.

do you mean the masochists?
posted by matteo at 12:48 PM on April 29, 2006

That $11.5mm comes from Sequoia Capital - not dumb money in the slightest*. Here are their internet portfolio companies.

They need to update their Web site. MP3.com was sold/dismantled 3 years ago.
posted by mrgrimm at 3:25 PM on April 29, 2006

I think youtube will be sucessful if they place in-video ads.

Indeed. Just wait for the 15-second pre-commercials, in 5, 4, 3 .... the site will suffer but still make assloads for a while.
posted by mrgrimm at 3:26 PM on April 29, 2006

YouTube is the new Napster. The same draconian laws that make a sharpie pen illegal if it is used to "circumvent copyright" will destroy YouTube within the next few years.

Wrong. They will secure deals with major content providers who don't mind 30 second to 2 minute clips from their shows being shown, as long as they get a fat chunk of the 5-20 second ad being shown at the front of each video.

Youtube IS a real business, it's about exploding the way people consume TV. TV hit its stride with the 30 minute and 60 minute program, but then MTV proved that 3-4 minute video clips could be immensely profitable. Now the 30 second clip is a valid form of video entertainment, and YouTube is positioned to place a sponsor message in front of millions of those clips.

The copyright issues of Napster were problematic because the same thing you could buy in a store were being efficiently traded for free. You can't buy a 20 second South Park clip, even if you wanted to. And even moreso, you can't buy a 30 second parking lot fight either, but millions of people want to watch that.

I think it's basically up to them if they become something massive, or self-destruct.
posted by cell divide at 3:51 PM on April 29, 2006

The Webvan of 2006?

That was Kozmo, not Webvan. Get it straight. Webvan was a good idea badly executed; Kozmo was a bad idea.
posted by jjg at 5:25 PM on April 29, 2006

I think there should be a distinction made between educational video streams and entertainment video streams. You tube now primarily serves entertainment type streams (though there is some nominal educational benefit...sometimes.)

Educational/ learing -how-to video is the revenue boat that video stores, and now streaming media miss as the great revenue creator. Witness the 'For Dummies' series of books. Learning is one of the two great arteries of the internet experience. The other is of course entertainment. I just think the learning/ educational aspect has been given less focus and yet ironically that is where the majority of revenue potential lays. Let me expand.

If there were a large database of streaming educational videos ,say, terabytes and terabytes worth (there undoubtedly already is, it just hasn't been compiled in one database yet); 100's of thousands of educational videos ('read'... all the retrivable-by-net educational/ learning type video) in a searchable database, all streaming free with related and targeted advertising , well then you have a business model that works. There is undoubtedly pre-existing content in great quantities waiting to be compiled as well as the potential for creation of targeted and speciaized content.

First you've provided me with specialized content that I am interested in because it either makes me money or makes we WANT to SPEND money on it. It could be an educational video on RC models, sewing, fishing, car racing, using a hot stamping machine, excel data sheets, how to write a book, a review of consumables like this years cars, how to make a web page, how to operate or repair a Heidelberg Printing press, or repair my car, perfecting my golf stoke....whatever. But you've compiled all that info (so I know where to go to get it) and served it to me free whilst serving ads targeted to that interest (much in the same way google pulls keywords out of an email and pushes an ad to me via sidebar that I actually click on because it serves a need I might have. Very clever what Google has done there. Their side bar ads actually help me find very specialized stuff I sometimes cannot find any other way.)

The key is being the first great repository of educational learning type streaming media, coupled with targeted advertising in the sidebar filtered out of the 'other' content that that internet is comprised of and amalgamated in one repository and streamed free with co-related ads 'pushed' to viewers based on their area of interest (as determined by what video they click through to.) Now you have a business model that works.
posted by Muirwylde at 1:13 AM on April 30, 2006

Kozmo? Rumor was that they nearly got RICO'd because their 3AM delivery guys were dropping off more than candy bars.

Not that the bars weren't needed. Heh -- munchies.
posted by effugas at 2:43 AM on April 30, 2006

sourbrew wrote "Their recent upgrade to a new video player seems to be a step in that direction. I actually wrote them an email today praying that they would do 3 things with this advertising model."

I was thinking their recent upgrade was so they could still remain relevant with Google Video touting better/faster technology and sitting side-by-side on sites like VideoSift. I hardly had an opinion about the two sites before using vSift -- hitting the reply button on YouTube videos quickly led me to look at the Google videos first, and to think things like "Damn, why are they still using YouTube?" As this progresses, they'll very quickly have to rush to maintain dominance and relevance -- as mentioned above, in-video ads will drive people away quite speedily when the competition is giving the same thing away for free.
posted by VulcanMike at 8:38 PM on April 30, 2006

"Replay" not "Reply."
posted by VulcanMike at 8:39 PM on April 30, 2006

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