I’ve said on many occasions before that while I often find Google’s products underwhelming, I really do admire their ambition. What Project Glass amounts to is the next natural step in creating a cloud of data around the physical world.
It looks like Logitech is out of the Google TV market:
The mistake, plus “operational miscues in EMEA” cost the company “well over $100M in operating profits.” De Luca did throw Google a bone by saying that he believes Google TV will have a chance sometime in the future, but it would be a “grandchild of Google TV” that would do it. Logitech clearly has no plans to help make that happen, opting instead to sit “on the bench” (as De Luca had put it in an earlier call) until Google can find success.
The real problem, though is that “Internet on the TV” is not where TV watchers are going. Instead, most TV watching is trending towards being a two-screen experience: you watch the show on the big screen, and chat about it on Twitter or Facebook using a mobile, laptop or tablet. The idea that you do everything on the same screen is just too ’90s.
“Until now, YouTube has concentrated mainly on amateur user-created content, professional music videos and short promotional clips from television shows. The only major international event it carried live before the I.P.L. was a U2 concert from the Rose Bowl in Pasadena last year, but it did not have corporate sponsors or pay the band a fee.
Now, though, YouTube could carry concerts and games from around the globe. Google will be looking at ‘more live events and live sports,’ said Shailesh Rao, managing director of Google India, in a recent interview in his office in Gurgaon, the outsourcing boomtown south of New Delhi. Many sports leagues noticed the cricket tournament’s successful webcast, he said, and Google is having ‘new conversations with lots of folks.’”
Translation: We’ve realised that there’s no way that we’re ever going to get enough revenue from YouTube to cover the vast costs of churning out all that video, so we’re desperately experimenting with every kind of paid-for and premium content we can find.
Since Google releases almost no information about YouTube’s financial performance, the best we can do is make educated guesses. Here’s another one: The word’s biggest video site will be generating more than $1.1 billion in revenue by 2011, and Google will keep about $700 million of that.That estimate comes from Citigroup’s C Mark Mahaney, who notes that the site continues to grow, and that it’s placing more ads on more videos. No news there.Mahaney is good enough to explain the logic behind his estimate, and it’s a fairly simple one: He takes MySpace’s revenue-to-page view ratio and applies to YouTube.
So he makes a guess about MySpace’s CPM (he notes it’s “estimated”), applies a guess that this *might* be similar for YouTube (ignoring the fact that a video site is not the same as a social network site), guesses that the mix between CPM and CPC ads is the same on both sites, and then guesses that comScore’s figures are correct. He then throws into the mix a complete guess on YouTube’s costs ($300 million sounds massively low)… and publishes this as “analysis”?
How much are CItigroup’s clients paying for this, exactly?
Jeff Jarvis fires off a couple of questions in an apartment in Davos to the Googlers. Here are Eric Schmidt’s answers, with some handy translations from Google-speak.
Phones: Will they have a tablet? “You might want to tell me what the difference is between a large phone and a tablet,” Schmidt said.
You bet. No way will we allow those fuckers in Cupertino to leverage Quattro Wireless into our turf. No fucking way.
How will they make money on phones? “Not to worry,” Schmidt said. “We do not charge for Android because we can make money in other contexts.”
We will leverage our massive monopoly in online advertising to cross-subsidise mobile handset development. By the time the DoJ notices what we’re doing, hopefully the competition will be dead and we’ll rule. There’s no way we’re giving Apple, Microsoft, or anyone else the chance to undermine our ad sales. I studied the Microsoft playbook, and it worked for them for 20 years. Why not for us?
“In the last year, Chad managed to figure out a way to make money using partners and their video content on YouTube,”
Chad’s going to charge for content and stick it behind a paywall. You can do that if you have premium content. That’s What Google Would Do, Jeff, we just forgot to tell you that bit before you wrote your book.
(Photo by World Economic Forum)
I’ll keep updating this one as and when they come in. And boy, are they coming in. With the honourable exception of David Pogue, everyone seems to have lost all their critical faculties, journalistic skills, and in some cases basic ability to write English sentences which parse.
First up, Max Tatton-Brown, in his post entitled “Why the Nexus One is not ‘just another Android phone’“, which he begins with:
“Okay, let’s make this clear: The Nexus is just another Android phone.”
It isn’t just another Android phone. But then it is! OK. But it’s from Google, and they play a canny, long-term game which leads to success:
“Furthermore, Google are notorious long-game thinkers. They gradually manoeuvre their way around the industry, insidiously implanting the importance of their products into your everyday lifestyle. It’s viral. For example, Wave. I’m not writing this on Wave, therefore many will be eyeing it up as a bit of a flop. Nonsense, look at the next few years and then we’ll talk.”
Yeah, they’re great at the longterm. I mean look at the success of Lively. Or how they’ve defeated Twitter with Jaiku. And how Orkut has beaten off on the threat of Facebook. Google Video was so successful that who remembers YouTube? Google Notebook is now where everyone stores their notes.
And I’m still playing Dodgeball.
Meanwhile, even the BBC is getting caught up. Maggie Shiels begins her post with:
“Google has said it is defending its online advertising empire with the launch of its own brand mobile phone.”
She then goes on to quote not one but SIX people to confirm this.
Only one problem: None of them work for Google. I haven’t read a single quote from anyone at Google saying it is selling the Nexus One to defend its ad empire. Certainly, there is no such quote on this story.
When I was writing news, my editor would have knocked seven shades of shit out of me for saying that someone said X without a direct quote which said X, preferably in the next paragraph.
More idiocy, no doubt, to follow. I’ll just update this post shall I?
So much for not charging for content. According to Peter Kafka, Google wants to erect a paywall around part of YouTube, charging on a per-view basis to watch TV shows:
“Google’s video site has been trying to convince the TV industry to let it stream individual shows for a fee, multiple sources tell me.
YouTube already lets users watch a smattering of TV shows for free, with advertising. Now it envisions something similar to what Apple and Amazon already offer: First-run shows, without commercials, for $1.99 an episode, available the day after they air on broadcast or cable.
Sources say the site’s negotiations with the networks and studios that own the shows are preliminary. But both sides seem optimistic, since models for such deals already exist.”
No doubt that Google’s cheerleaders will be racing to claim that this is a daring move, and certainly doesn’t try and impose any kind of artificial scarcity like that nasty old-fashioned Mr Murdoch is trying to do for news. After all, it’s hard to find TV shows for free on the Internet, right?
“Google’s YouTube acquisition is looking less and less like a financial boondoggle every day. YouTube is now selling ads against 9% of its content, versus 6% a year ago (and remember, this is a market in serious recession).”
The reason for that is simple: while its revenues should grow at a more-than-respectable 20% in 2009, the number of streams it serves will grow at a rate almost double that (38%).
As Credit Suisse estimates half of YouTube’s expenses come from bandwidth, this means that the growth in revenue is only just paying the bandwidth bill for the growth in traffic.
Add in all the additional costs in infrastructure, people (and now licensing) and it’s clear that it will have to sell a hell of a lot more advertising than 9% of inventory to bring it into the black.
Basically, at the moment, every time someone watches a video on YouTube, it costs Google about 10¢. Delivering ad revenue of 10¢ per view is going to be a really big challenge, even for Google’s mighty ad sales machine.
What’s interesting is that Michael notes that major content creators are coming on board to YouTube, having opposed it for years:
“It also seems like the commercial content producers that were so up in arms about YouTube’s “theft” of their copyrighted works are not only backing down, but stepping up. The latest word is that Sony is going to experiment uploading full-length feature films to YouTube.”
Of course, content like legitimate movies makes it a lot easier to sell ads than, say, chipmunks. If Michael is right, and the content creators ride to Google’s rescue, that will represent a remarkable turnaround – from the dream of “user generated content = revenue” to having to the reality of being rescued by content from major studios. Won’t that be something?
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Farhad Manjoo at Slate offers a timely reminder of one of the underlying realities of online business:
“Everyone knows that print newspapers are our generation’s horse-and-buggy; in the most wired cities, they’ve been pummeled by competition from the Web. But it might surprise you to learn that one of the largest and most-celebrated new-media ventures is burning through cash at a rate that makes newspapers look like wise investments. It’s called YouTube.”
I’ve said before in various conversations that one of the factors that big online publishers need to consider is the value of the traffic they are getting, and YouTube is a perfect, if extreme, example. Without a real method of turning traffic into money, every visitor represents a cost to your business. Bandwidth, server maintenance, development, and infrastructure might have a low cost on a per-user basis, but they’re not free, and the more users you have, the bigger than sum is going to be.
Saying, as some commentators do, that you should build traffic before having at least the outline of a plan to turn that traffic into money is simply unsustainable in the current economic climate. It was actually unsustainable in the old economic climate too, but the flood of cheap credit based ultimately on overvalued assets and Chinese savings disguised that fact. It made it seem like the era when VCs would endless fund business with no business model (and big companies would buy them) would go on forever – and that’s sadly not the case.