
YouTube is not a real business (2006) - visakanv
http://calacanis.com/2006/02/20/youtube-is-not-a-real-business/
======
mcintyre1994
> SNL obviously got more from the viral nature of this promotion than anything
> they could ever buy. They should put every single one of the skits on the
> Internet _for free_ and put an advertisement in front of them.

It's incredible with hindsight that it wasn't obvious - at least not to the
author - that you could monetise YouTube by becoming the place to do that.

~~~
visakanv
Yeah. I remember when I used to use MySpace and Facebook simultaneously,
thinking FB was kinda interesting but I much preferred MySpace (because
music).

Not only do things change dramatically, it's so easy to forget how things were
before. At the time, Facebook (for me) was all about SuperPokes and Mafia Wars
and Poker. No photos, no at-mentions, status updates and sharing news was
harder, no share button.

~~~
jimmaswell
As far as I can tell MySpace really was the superior option, Facebook just
happened to get more popular and get more critical mass for some reason.

~~~
benihana
Facebook had a small, exclusive original audience. You had to have a .edu
email, and you had to be at one of the chosen colleges to be able to sign up.
I think the exclusivity and the fact that high schoolers with animated gifs
all over their pages weren't on it made it popular to college students.

~~~
guelo
The next young crowd is always fickle, looking for the next hip thing to
escape from the established path. That makes social networks inherently
unstable over time. And that's why Facebook is always on the lookout for any
new breakaway social network and will pay dearly to bring it under their
umbrella.

------
visakanv
> "Let me break it down: YouTube and other video hosting sites have made it
> easy to pirate stuff on the web (which is where piracy started), but they
> shouldn’t be positioned as some revolutionary business. It’s a silly, little
> business that anyone could setup in a week. The fact that folks are talking
> about them being bought for some large amount of money by Newscorp is
> commical. They are a glorified FTP site with TAGS people! I could set this
> up in a weekend with two kids in high-school and a couple of cases of Red
> Bull. In fact, the first two programmers to email me with a decent resume
> I’ll back you guys to build a YouTube compeititor–provided you can build it
> in under five days."

I guess the lesson here, as with all sorts of criticisms of early products–
Instagram, the first iPhone, and even the Internet itself– is that it's easy
to underestimate how much things can change, and how powerful a large audience
can be. I'm sure I'm not being nuanced enough there (because sites with large
audiences don't always keep them– Digg, MySpace).

Would love to hear some smart thoughts about what we all ought to learn from
this sort of thing, so that we (hopefully) don't keep making the same
prediction errors over and over again!

Or is it simply inescapable?

~~~
InclinedPlane
It's easy to forget that things change, and change tends to be exponential.
What YouTube did was remove the hassle and fiction in posting videos online.
It used to take a lot of effort, and many people who didn't know enough didn't
realize the complexities involved.

The author here calls youtube an ftp site, and in doing so ignores what set
youtube apart. Youtube automatically transcoded videos, it played videos in
your browser inline with other content, and it was free. All you had to do was
make your video small enough to upload and YouTube did the rest. You didn't
have to worry about codecs, or hosting, or bandwidth Nichols, or domain
registration, or any of that. Previously if you wanted to host a video online
you had to optimize the encoding, pay for bandwidth, and worry about
compatibility depending on encoding. Then your video would be viewed by a
browser plugin, usually as a bare video.

Plus there was a catch-22, if your video got too popular it would cost a ton
of money to host. Youtube got rid of all that hassle, and in so doing
naturally started to acquire content and users. Once the critical mass network
effect kicked in then youtube became the default place to view and post any
and all video content. From there it should have been obvious to anyone paying
sufficient attention that the quality would only go up, the costs of bandwidth
and servers would only go down and with a sufficient number of viewers that
some monetization strategy or another was likely to be effective.

People made similar mistakes about tons of new technologies, the commonality
is often assuming that the launch state is the end state, and not square one
of a massive acceleration in sophistication, features, etc.

~~~
visakanv
> The author here calls youtube an ftp site, and in doing so ignores what set
> youtube apart.

Great point. Very often people when people don't understand a business, or
dislike it, it seems that they reduce it to its superficial components. Eg
"Uber is just private taxis", "Amazon is just an online bookseller", "Twitter
is just a microblogging service".

There's usually something more to it than meets the eye, if you're willing to
look.

~~~
yla92
I remember people said[1] we could do the same as Dropbox by "getting an FTP
account, mounting it locally with curlftpfs .." when the drew houston posted
on HN. Not that we couldn't, just that not every user is capable to. So, look
at where Dropbox is now.

[1] :
[https://news.ycombinator.com/item?id=9224](https://news.ycombinator.com/item?id=9224)

------
zokier
It is pretty indisputable that YouTube got where it is now by exploiting
large-scale piratism. While I'm not fan of piratism overall, at least when it
sort of communal effort it somewhat palatable. But for-profit piratism really
crosses the line and imho is fairly disgusting as a business.

~~~
visakanv
This comment reminds me of book pirates stealing books from England [1] and
publishing them in the US (which the English had been previously doing to the
French):

> Some (U.S. publishers) sent agents to England with orders to grab volumes
> from bookstalls... and ship them west by fast packet. Copy was then rushed
> from the dock to the composing room, presses run night and day, and books
> hurried to the stores or hawked in the streets like hot corn.

One of the most successful pirates was the company that eventually became
HarperCollins, now owned by News Corp.

[1] [http://www.cnet.com/news/how-piracy-built-the-u-s-
publishing...](http://www.cnet.com/news/how-piracy-built-the-u-s-publishing-
industry/)

------
waterlesscloud
Isn't the official story that YouTube _still_ isn't profitable?

If that's true, then Calacanis kinda had a point.

[http://www.wsj.com/articles/viewers-dont-add-up-to-profit-
fo...](http://www.wsj.com/articles/viewers-dont-add-up-to-profit-for-
youtube-1424897967)

~~~
cloudwalking
"YouTube stars in Google's latest earnings call"
[https://fortune.com/2015/04/23/youtube-stars-in-googles-
late...](https://fortune.com/2015/04/23/youtube-stars-in-googles-latest-
earnings-call/)

Like any other business, you reinvest profit as long as your growth is
accelerating.

~~~
ghshephard
The alternative is to stop growing, collect profit, and pay taxes.

------
s_dev
To be fair to Calacanis - who is often both wrong and right and seems to draw
a lot of ire for being brash and at least hes specific and keeps the archive
up. Making predictions is a hard problem. Lots of people thought MySpace was
going to be the social network at the time -- the postion FB occupies now.

I'm not sure why he placed so much value on Engadget - thats just a big tech
blog. I don't see how he didn't see the potential in YouTube which ultimately
carried Googles attempt at social networking - though unlike MySpace, YouTube
didn't have a clear second at the time - DailyMotion would be the only I could
think of.

~~~
visakanv
I think one of the big lessons about prediction is– avoid dramatic predictions
that something is NOT or NEVER going to happen (Internet, iPhones), and avoid
predicting that something WILL totally change the world (Segways). Better to
be cautious and talk about the underlying principles. (People are always going
to be interested in cheaper products, faster shipping, being able to do more
with less, communicating with one another, etc.)

Of course, this assumes you're interested in being accurate in your
predictions. Lots of people get by great with making faulty predictions, as
long as they don't have to bet their own livelihoods on their predictions.

~~~
coldtea
> _People are always going to be interested in cheaper products_

Ironically this has been the constant anti-Apple motto since 2003, and it has
been disproven time and again, with cheaper alternatives that would "kill"
(the iBook, iPod, iPhone, iPad, Air, etc) failing in the market.

It's not that people don't like cheap, but it's not the be all end all, and it
can't be used for certain markets that are driven by other needs (including
vanity).

~~~
visakanv
Oh, yes, absolutely.

To refine that statement a little– I don't mean that people won't want iPhones
and Macbooks and Apple Watches. The latest Macbook looks so amazing, I totally
want one!

What I mean is that if two products were IDENTICAL, people would want the
cheaper version. The way Apple stays ahead is by ensuring that their products
are always better in SOME way (even if it's "just aesthetics" or "just
branding"– it translates to real value to the customer.)

This applies more obviously to commodities– say, equally good shaving razors,
equally good refrigerators and so on. You're totally right that it's not the
be-all-end-all.

------
jasonmcalacanis
What a horrible headline in 2015 -- but I stand behind it in 2006!

The fact that YouTube exists today is a miracle, and you have to really give
kudos to the team there, as well as Sequoia and Google, for literally saving
this business.

At the time I wrote this YouTube was not a real business, it was a very simple
website built off copyright violations with unsustainable legal and bandwidth
bills!

The fact that they were forced to sell a business that is now worth $100-150b
for $1.6b is a good indication for how close to the brink of destruction they
were.

Now, the important lessons here are:

1\. Google made a sick, sick bet and won big. \------- Given that Napster,
Kazaa and countless other "media sharing" services had been absolutely
crushed, it is a true testament to Google's legal and leadership teams that
they took this risk. It was not clear that they would win their cases, but
they did.

2\. Content ID was a brilliant innovation. \-------- YouTube was able to calm
down many a pissed off media holder when they showed them contentID: "look, we
know this is your video so we will shut it down or let you claim it -- and the
revenue from it -- for all time! what would you like us to do?" Think of how
fucking brilliant that was? That's perhaps the biggest lesson: you can
innovate your way out of legal trouble!

3\. bloggers have no idea about where things are headed. \-------- At the time
I wrote this I was literally a nobody. I used to blog with recklessness
because, well, I really didn't think people read much of what I wrote. Things
have changed a bunch for me, and now that I'm older I actually pull many
punches when writing about other founder's companies. the thing I regret most
about this post is not me being so fabulously wrong, but the fact that I was a
dick to three founders working really hard to battle impossible odds. Sorry to
Chad, Steve and Jawed... sincerely.

best @jason

------
perdunov
He was right, but in the wrong model of society.

This is the kind of mistake a founder should always watch out for. Like, keep
repeating to oneself: people are not like you, people are not like you.

~~~
visakanv
Yeah. That's the classic thing to be said about all failed predictions, isn't
it? They're all rigorously accurate... within the wrong models.

Relatively harmless when we're armchair theorists wondering if the Apple Watch
is going to take off or not, but devastating when we make projections about
economies, finance, housing prices, etc.

PS: Also, the "anybody can put together the same thing" argument has been used
to discredit all sorts of things, hasn't it? Dropbox, Instagram... It reminds
me of that joke about Modern art. "It's so simple, I could've done it." "Yeah,
but you didn't."

~~~
Retra
Everything is obvious in hindsight. People actually know what heat is these
days, but for most of human history, we didn't. So it's easy to imagine you
could have invented a steam engine in 1400 or something.

But nobody did, and there's a reason for that.

~~~
thaumasiotes
[http://en.wikipedia.org/wiki/Aeolipile](http://en.wikipedia.org/wiki/Aeolipile)

> In the 1st century AD, Hero of Alexandria described the [aeolipile]

> The aeolipile Hero described is considered to be the first recorded steam
> engine or reaction steam turbine

------
lkrubner
What a different era this was:

"Watching DIGG, Engadget, and MySpace climb in the rankings? Those are real
businesses."

~~~
ronniemcdon
I'm still amazed at what happened to Digg. I miss it.

------
jcoffland
It takes skill to be that wrong.

~~~
waterlesscloud
All it really takes to be that wrong is a willingness to express your opinion
and to leave it up after it becomes embarrassing.

There's plenty of posts on HN at least this wrong every day. :-)

~~~
dredmorbius
Cmdr Taco's take on the iPhone at /. comes to mind.

~~~
sukilot
iPod!

~~~
dredmorbius
Doh!

Yes.

------
brosefstalin
digg WAS the real deal... until they stupidly decided to revamp the entire
site. After that, everyone bailed to reddit, despite ridiculing reddit's
interface as ugly and unreadable (this was literally one of the posts that had
most diggs on front page just a day or two before the interface change came
into effect).

I'm quite bitter about how the whole thing went down because it completely
ruined reddit. As folks from Facebook began to wander outside their confines,
one of the first places they usually discovered was digg. digg was like the
floodgate that kept all those Facebook people away from the rest of the
internet. Once the floodgate broke, they all moved to reddit.

If you look at reddit today, it's a complete cesspool.

~~~
visakanv
I'm interested in your perspective but some of the things you say feel a
little weird to me: "folks from Facebook wandering outside their confines",
"rest of the internet", "complete cesspool", "completely ruined".

Could you be a little more rigorous in your statements? Are you saying that
Reddit was great before Digg users migrated? What exactly do you mean by
"complete cesspool?"

~~~
brosefstalin
It wasn't "great" but reddit used to be a nice place to stop by and find
quality content on the front page.

These days on reddit, you will find on the front page:

reposts;

"dank may-mays";

pictures of someone's kids, relatives or pets;

celebrities who are peddling shit in exchange for the most generic answers on
AMA;

advertisements disguised as normal posts (e.g., subreddits of movies, tv,
music);

world news posted with a spin to stir outrage by government agencies hiding in
military barracks of US and UK and "troll houses" in Petersburg;

and other junk that's posted to appeal to the lowest common denominator.

This is especially true with subreddits that are promoted to default status.
It used to be that you could find refuge in other subreddits, but even now, as
soon as word spreads of their existence, they too become saturated with the
Facebook folk.

~~~
visakanv
Oh, fair enough. I think that's a function of large audiences– the larger an
audience gets, the more it allows puns, jokes, etc to rise to the top– and the
more incentive there is to be thoughtlessly controversial, and the more
incentive there is for advertising and spam.

The challenge to maintain standards when an audience grows is really hard.
There are some subreddits that try, but it seems like a universal problem (as
far as I can tell.)

~~~
Qwertious
I suspect it goes deeper than that - one thing I've noticed is that the Dwarf
Fortress community has much more depth than the TF2 community. I suspect that
this is due to TF2's ease of consumption in comparison to Dwarf fortress, or
rather Dwarf Fortress's high barrier to entry in comparison to TF2.

