Wednesday, February 6, 2008
Monkey see, monkey do
Sure, YouTube cashed out big when Google bought them. Since then, has anyone paid anything for a video sharing site? There's gotta be 200+ YouTube wannabes out there, and all of them are dying on the vine. Revver was thought to be the next YouTube, but CNET reports today that they're on the auction block for $300k-$500k + the assumption of their $1M pile of debt. The picture here is a grab from the bottom of Revver's website. I think its a monkey. After all, monkey see, monkey do. And that's all that Revver did. Copy YouTube. They not only copied, but the business model ended up being the same even though they claimed/planned otherwise.
So, what happened? Nothing. Both YouTube and Revver are doing the same thing - NOT MAKING MONEY.
The problem is that a generic video sharing site that doesn't appeal to anyone makes ad dollars difficult to come by. Sure you can sell on shear volume of impressions, but the real money is in placing advertisers in front of their primary markets. Look at Revver's website - nothing but Google ads. If the network was valuable, you'd be able to see your own ad inventory. But alas, this isn't the case when you have scattered content that's across the board.
Google said they missed their last quarter numbers because social networks aren't monetizing very well. Go figure. I ,for one, am not surprised in the least.
This also relates to Facebook - to which I've blogged about before. Sure they got a $15B valuation, but what's the REAL numbers behind it? Anyone care to guess? Try $150M in ad sales last year. Seems that problems around monetizing social networks isn't isolated to just Google.
Sure the network is huge, but the costs are too. Facebook plans to spend $200M in 2008 just on infrastructure upgrades (ie. servers). The cost to revenue ratio is a little out of whack. The cost of scale isn't working for them. Google has that nailed better than anyone, but they can't build a social network to save their asses. They'll have to buy one. (BTW - an acquisition should be announced soon)
[UPDATE : Don't get me wrong - I don't think YouTube and Facebook (sorry, I should also include Myspace) are doomed. Because they are the big dogs and have proper investments behind them, they'll do just fine. Even if it takes time to work out the monetization issues, they've got the money in the bank to get over the bridge to the promised land. I'm really critical of the wannabe's : Its difficult to breathe when the big guys are eating up all the oxygen in the room.]
So, where is all of this leading? It's leading to the simple fact that being everything to everyone doesn't pay very well (unless you make it BIG). The revenue stream comes from finding a niche/vertical and living in it. This way you can implicitly know your audience and plug in ads that not only pay well, but more importantly, are effective. The advertisers keep coming back and the long tail gives and gives.
Enter stage left - Howcast. Just the sort of thing I'm talking about.
That path will lead to solid revenues, albeit with a smaller user base. (smaller, but still good numbers) But in the end, small fast and profitable beats the heck out of a fire sale any day.
Anyone want a banana?