Tubular Belles

Posted by Mike Walsh

10/10/06 1:36 PM

If baby boomers day dream about winning the lottery, Gen Xers just fantasise about selling out to Google. In their video message to the YouTube community announcing their sale to Google - founders Chad Hurley and Steve Chen could barely suppress their grins. And by the endof the clip, they were killing themselves laughing. I don't blame them.   US$1.65 billion buys a lot of Ferraris and pina coladas. But as with all big media deals - the 'what' is never half as interesting as the 'why'.

When Fox bought MySpace everyone sucked in a quick breath on the price, but breathed out a sigh of relief when they digested the size and scale of the traffic. Even at the time of the deal, it was already one of the world's biggest sites. Most people, even stock analysts, understand the idea of page views. If MySpace was doing more traffic than Google, it must be worth something. You could look at the YouTube deal the same way. But you would be missing the main point. One, I think, that the management of Google grasped immediately.

In the conference call immediately after the deal was announced, Google CEO Eric Schmidt explained that the major reason why Google needed YouTube when it had its own highly evolved video product, was due to the social media aspects of the network.  “That’s what really drove us to begin the conversation" - said Schmidt. The value of YouTube to Google therefore, and to media companies in general is not the number of people who turn up each day to watch streamed video clips - but the connections between the audience members themselves.

Audience networks are the key. To understand how media is changing today you have to look past new technology, and focus instead on changing audience consumption patterns. Consumers are more connected than ever before. They don't just watch a TV show or listen to a pop single. They blog about entertainment, rate and tag content, forward links to podcasts, post video clips on their web profiles, or just group email stuff around. The era of passive media consumption is being replaced with something requiring far more audience involvement. Its what I call 'Networked Media'.

Thats why despite the hype, the real 'why' of the YouTube deal has nothing to do with software or traffic.  As it stands, Google Video was already a seriously impressive piece of engineering. The search technology was slick, and unlike YouTube's service, you could easily download clips straight to your computer, iPod or even Sony PSP. And what's more, you could even set the video results of your search to play concurrently. But there is one thing that was missing from Google Video that really set YouTube apart. Community.

A year on from the MySpace acquisition, it is pretty clear that the real value of the site was not the eyeballs at all - but the structure of the user base itself. MySpace users are not only numerous, they are highly interdependent and self organising. The reason why the music charts are so full of new entrants discovered on MySpace is not just because because the site has lots of members. It is due to the ways in which MySpace users interact. New ideas, brands, and entertainment products replicate through the network like wildfire as users comment, forward, issue bulletins or simply post media content directly on their profiles. In many ways, YouTube is a mash up of the personalisation aspects of MySpace with the organisational logic of Flickr. Flickr, a photo sharing site sold to Yahoo for what now looks like an absolute bargain, basically wrote the guidebook on how to use social networks to give context and meaning to media content.

That's not to say that YouTube was overvalued or can be easily copied. Creating a platform that features deep connections between consumers is a seriously tough trick to pull off. With the exception of Brazil, Google's Orkut experiment dramatically failed to penetrate the broader world user base. It is a curious characteristic of social networks, that depending on the geographic concentration of certain social cells - you can find deep pockets of usage in some countries, and a total absence in others. Hence Friendster is a big hit in the Phillipines and Malaysia, and Bebo in the UK. Elsewhere, less so. Indeed, whether a particular social network ever hits critical mass seems to owe as much to planning as sheer dumb luck.

And that is likely to be one of the lasting ironies of the rise of YouTube over the last eighteen months. The highly distributed nature of the service, which allowed users to embed video streams on other websites, meant that much of the traffic to the network actually originated from elsewhere. Fox was certainly under no doubts as to where that might have been. Late last year, News Corp chief operating officer Peter Chernin told investors that 60-70% of YouTube traffic actually came from MySpace.

Over the next year or so, there is little doubt that the consumer usage of online video will rise dramatically across the board. And sure, there will be some television networks who either get tired of suing start ups or dealing with upstart platforms and try and go it alone. And then there will be others which experiment with a range of different business models with the Googles, Yahoos and MySpaces of the world. Either way, we are accelerating to a future in which every piece of entertainment content will be easily available online.

And you can be sure of one thing. Networked Media is here to stay. 

Topics: Media

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