Most of you have already read that Google is in talks to acquire YouTube for a reported $1.5+ billion.  In fact, TechCrunch and ShoeMoney.com broke the news in the online world after the WSJ reported that the talks began to heat up.

THE PRICE TAG IS SIMPLY RIDICULOUS 

What if Google buys YouTube?  Well, first, I think the price tag is absolutely, unconditionally, undeniably, ridiculous.  In fact, at a $1.6 billion buyout, YouTube would be priced at the same price Google was worth on the day it IPO’ed.  YouTube is no Google, even then.  YouTube was created less than two years ago and since has shared a leadership position in the video sharing space with MySpace, while Google flounders in the top 10 websites for sharing videos.  While I’m loving what I’m seeing in terms of the online space heating-up with more and more M & A’s (think Linkshare at $425 million, PriceGrabber at $485 million, Shopzilla at $525, million, MySpace at $580 million, etc…) in the last year than we’ve seen since the dot-com celebration (which I personally enjoyed!) in the late 1990’s, the valuations I’m starting to see seem a little bit over-the-top.

WEB 2.0 / TECHNOLOGY INNOVATION RULE

I’d like to sum up my feelings about where the internet is going and why “new” start-ups like YouTube are gaining so much traction, so quickly, with one word - NIMBLE.  A few months ago I was talking with an unnamed friend who happens to be an executive at a publically traded company.  She said to me that while her company is growing at an unbelievable clip, her concern and that of other execs at her company, is that the company has gotten so big that they no longer innovate at the same speed they did when they were smaller and more nimble.  See, the problem for larger companies is that there is so much red tape that is typically associated with everything that it becomes almost impossible to compete with smaller, nimbler, companies like YouTube.

The future of the internet today, tomorrow and within the next 12-months is Web 2.0 and technology innovation - the newest and hottest technologies of 2005 have been replaced by the newest and hottest technologies of 2006, which will be replaced by the newest and hottest technologies of 2007.  Who is going to invent these technologies?  Google - possibily, but I would argue what my friend was arguing - it’s unlikely as Google continues to get bigger and bigger bec/ they will increasingly move slower and lack nimbleness.  In fact, when you are as big as a Google or a Microsoft you are in many ways at a considerable disadvantage to release new products at a fast pace - look at Google, for instance, who is being criticized for releasing too many products too quickly (by the way, this is a problem unique to Google and the “Google Way” since Google allows their employees to spend up to 20% of their time inventing new products - I’m totally for this way of thinking, in fact - I think it’s awesome - this is how Gmail and Google Maps were created, but the problem for Google is that they are so big that they lack the nimbleness to incubate the products fully before attaching them to the Google name.)  Anyway, Google is a search-engine and people want to use the Google search-engine.  They want to see other companies like YouTube and MySpace and Linkshare incubate products that are equally innovative, but unique to the innovator.

Another reason why I think newer, innovative, nimble companies are at a considerable advantage to become the next YouTube is because I believe that many of the reasons they have been able to differentiate relate to the technologies they use to build their product.  For instance, Shopping.com is a comparison engine that was built using “point and click” technology…no ajax, no dynamic HTML.  Instead, for years Shopping.com has taken visitors on a wild goose chase throughout the shopping.com website to find products, read reviews, and write reviews.  Even today, if you find a product on Shopping.com and want to read a review of that product you are required to click a link, which takes you to a separate page (I would argue this disrupts the shopping experience) where you can read reviews.  Interestingly, the reviews are provided by epinions.com, a company that is / was more nimble and Shopping.com purchased bec/ they figured out a way to get a ton of people to write reviews, while shopping.com was failing in that area.  Anyway, so get this, if you decide you want to write a review on shopping.com you can’t….well, at least not on their wesbite.  Instead, you click yet another link from the shopping.com website and they transfer you over to the epinions.com website where you can open up an account if you don’t have one and start writing that review.  What happened to your shopping experience at this point?  Well, if you don’t find yourself frustrated by the shopping.com experience you must have much more patience than most people.  Why do I mention this “point and click” example?  Because the shopping.com system is outdated and people no longer want to point and click around a website if that same experience could be integrated…Using AJAX iWeb 2.0 companies like pepperjam.com have used ajax to fully integrate the comparison shopping experience by allowing consumers the ability to read and write reviews, check out special offers and deals, and compare prices all without leaving the unique user experience - while the product is still in BETA,  this is a good example of using Web 2.0 technology to attract visitors, while watching the bigger, slower moving companies stick to the same old technology that had become outdated and boring.

So what does being nimble mean?  What are the benefits of being nimble? 

To move quick, to take chances, to welcome risk, to innovate on the fly, this is what it means to be nimble….When you have to go through a series of hoops to gain approval or are forced to BETA-Test everything to death, you lack the nimbleness found in smaller start-up companies. 

Clearly, YouTube is a perfect example, because the company started small they were able to be a sort of renegade in that they didn’t really differentiate between copyrighted and non-copyrighted videos.  While this is likely to come back to be a serious legal issue for YouTube (or Google, it allowed YouTube to capture infinite market share and dominate the video sharing space.  Think about it, YouTube didn’t really have anything to lose as a small, fast-growing company.  In fact, they were able to stick their necks out and take chances that resulted in a massive, loyal, almost cult-like usership.  One of the reasons that Google and others have had difficulty gaining traction in the video space is bec/ they are so big (and public) that they have to play by all the rules. 

The benefits of being nimble are quite clear.  First, you place your company in a position to quickly gain a loyal following - when you can offer something better, more innovative and quicker, users will love you.  Also, once you are able to establish that loyal following you inevitably catch the attention of the larger, less-nimble, deep-pocketed companies.  In order to remain competitive and grow, these larger companies are forced to acquire you or wait too long and you may acquire them!

I’m a pretty large Google shareholder so I want to see them continue to grow.  However, I think that the pricetag of $1.6 billion is too large for a company in YouTube that is likely to be replaced by someone who innovates a newer way of sharing videos within the next 12-months or less.  I like the idea of the acquisition, but it should be for less than $1 Bill, with a capital B.

This entry was posted on Saturday, October 7th, 2006 at 10:51 am and is filed under search-engine marketing, affiliate marketing, internet marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.