All this talk about YouTube serves as a perfect back drop to discuss what makes a successful Internet company in this new wave.

Most of the well known companies are basic functions; technology-led not business case-led. For example, photo sharing (eg, Flickr, Photobucket), video sharing (eg, YouTube, iFilm), bookmark sharing (eg, de.licio.us). Flickr and de.licio.us have been acquired by Yahoo.

YouTube is, really, just a video hosting site. There is nothing to their technology which explains why there are so many copy cats. So they can’t sell their technology.

They also can’t sell the content on their site because it’s not theirs. Worse, a lot of it is copyrighted.

I just can’t see how YouTube will survive until Christmas. As I see it they have three options, none of which appear to pay-off.

1. Add advertisement: This could be banners, Google-like paid links and pre-roll ads (those 5-10 second “sponsor” snippets). Revver has done the latter with success. However, as they generate revenues from copyright content, they will become a target from copyright owners (remember Napster). Right now it is not worth sueing YouTube because they don’t have any money.

2. Go mainstream: YouTube could try to get blanket rights agreements with media companies. They already struck a deal with NBC following the eye-opening Nobody’s Watching experience where a long-rejected pilot was commissioned after strong YouTube viewership. However, media companies are great at extracting all the value created by their content. Media companies can always threaten to withdraw the licensing rights until they get all the booty.

YouTube (yes, they do seem to be at the centre of everything) may have brought a series back from scrapheap of pilots. Nobody’s Watching, written by the creator of Spin City and Scrubs was dismissed by the networks. A disgruntled associate of the creative team put the pilot series up on YouTube. The tremendous success it achieved (over half a million views) has triggered a bidding war… by the networks.

3. Find a buyer. Yet, whoever bought YouTube would be also acquiring an incalculable legal liability. As soon as there are assets behind YouTube copyright lawyers are likely to pounce.

Anyway, their position is quickly eroding. In addition to YouTube’s lack of funds, I believe media companies have not sued because they are letting YouTube create demand for “online video entertainment” and learning all they can about consumers’ needs before they launch their own services and shut-down YouTube. AOL, Yahoo and MTV are a few of the companies that have launched YouTube like services. Fox claimed that MySpace’s video product surpassed YouTube.

Prediction: I don’t think YouTube makes it to Christmas. They are going to be roasted along with the turkeys. Revver will become an important distributor of user-generated online video entertainment.

 

tags: YouTube Google video

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