Morons of the world, unite!

I think Mark Cuban is a funny guy, and he also happens to get it right occasionally. In a recent statement to an advertising group, Cuban said, essentially, that anyone who paid a stupid multiple for YouTube was stupid. A “moron”, actually, because YouTube was going to be sued out of existence and the fact that they’re delivering massive numbers of eyeballs wasn’t going to save them.

I tend to agree with Cuban, but maybe for different reasons. I think everyone is clear that YouTube is able to deliver “massive numbers daily”…for YouTube. The question for an advertiser is the same as it always is with media buys, which is how much of that “massive” audience can YouTube deliver for ME.It’s really the same issue as legitimizing p2p–if you have a community of people who are brought together with the promise of getting stuff for free, and largely illegally at that from the looks of it, why is that good evidence that YouTube attracts the right kind of “eyeballs”—meaning eyeballs that they can charge for, for people who buy things.

It would be one thing if YouTube could say (as can Yahoo!) look, I attracted this huge audience, and I sold 20,000 concert tickets in 4 minutes! I exaggerate, but only a little. To my knowledge, NO ONE has had that experience with YouTube or Pirate Bay or Kazaa or Morpheus.

Not that there aren’t plenty of people who want to expose their products to a large audience, but at some point the price that people are willing to pay to reach that audience is going to relate to how much that audience actually buys. This is like one of our home town bands that was at one point the most downloaded track on Kazaa—which resulted in exactly zero financial benefit to them from any revenue stream, as well as negligible PR value.

The lesson? Don’t be surprised if you don’t benefit from people who take your product for free. Or to paraphrase Jim Griffin, your biggest enemy is obscurity and you can still be obscure if a million people download your track for free. Only someone who had never sold records would fail to understand that if you give away unlimited quantities of your record for free, don’t be surprised if no one buys it. This is particularly true in the atomistic environment of Kazaa, Pirate Bay or Morpheus. Or YouTube. Show me how I can connect with fans and stay connected, then maybe I will pay you something for that connection.

But we’ve seen a resurgence of Skippy-ism lately, and people aren’t asking the hard questions they really should be asking. So like I said, it’s great for YouTube, it’s just not so great for ME.

Certainly there is a value for a company like Coke to use the massive eyeball sites for building brand recognition over the long haul, and there’s also value in adding another 20 or 50,000 units to the first week sales on an already hit record. But what about a new product or a new artist? Does advertising to people who are attracted solely because of free stuff really make that much sense?

The day that YouTube can demonstrate a consistent, repeatable causal connection between advertising on YouTube and sales, then Cuban will look like the “moron”. But until that happens….Hellloooo Skippy Dotcom! He’s baaaaack!

I think what Cuban is saying is that there is no rational business justification for anyone to buy YouTube, particularly not at the grossly inflated prices that have been thrown around. And Cuban is the reigning authority on selling companies at grossly inflated prices. I tend to agree with him, though, particularly this statement: “”User-generated content is not going away,” he said. “But do you want your advertising dollars spent on a video of Aunt Jenny watching her niece tap dance?””Somebody puts up something really good and you get, what, 60,000 viewers?” Cuban added during the event at Advertising Week in New York.”

I think that point’s pretty well taken–the worldwide cumulative audience on many of the most popular Internet sites is barely that of a P3 or at best a P2 radio station if you measure plays, not hits.Here’s a test for you: Start charging $1 a year to access YouTube, and see what happens to the “massive audience”. My bet is that the traffic drops by half in 30 seconds because these free sites attract the can by, won’t buy audience who also believe that information wants to be free, but for a different reason. That’s not good news for an advertising buyer who’s worth their salt.

As far as the legality goes, YouTube is a prime example of the different spanks for different ranks standard that’s crept into industry litigation strategy of late. It’s rapidly becoming a cost-benefit as opposed to a zero tolerance standard as far as I can see. The jury’s out–so to speak–on whether that’s a good thing.

I tend to believe that for videos that have been cleared by the label for commercial exploitation, the label probably has the rights for use on YouTube. There is the further question of how to identify any of these videos as having been cleared or not, or even more fundamentally to identify any video as anything. Literally anything, much less mine or thine. And then, of course, if you can identify the videos can you do anything with that information. If you are going to use any method of cataloging that data, what will you use to identify particular videos, and how reliable is that information, bearing in mind the many bad experiences with metadata filtering as well as Judge Patel’s admonishments in the Napster case.

This not to mention how to monitor and track the carving up of videos and use by amateurs. There are a small fraction of videos cleared for commercial exploitation compared to all audiovisual assets of a major record company, which will date back to some time around 1975 or thereabouts. Labels have their own internal “long tail” and there may be some value in getting some money for these assets. But not if clearance costs are more than you would make in the first year or two in even the rosiest of rose colored glasses.

I’m sure all these questions have been considered in great detail by all concerned and I for one am eagerly awaiting my enlightenment of how these problems were solved like a choirboy with his eye on the absolving wafer.

There’s another school of thought which is that you do a short term deal, get whatever money you can now, and if YouTube isn’t in line with industry norms in 6 months or a year, then you sue them silly.

Hard to know which it’s all going to be, but at this point I think that YouTube has a long way to go, and particularly a long way over the hurdles of the knowledge predicates of the 512 kinda sorta safish harbor of the much hated DMCA.

I’m willing to be educated otherwise, but I wouldn’t bet on the “moron” and against Cuban on this one.

One thought on “Morons of the world, unite!

  1. Hi there,I need help with a project I’m doing for work, and I’m thinking this is the right place to find help.We’re conducting a study on music, the media, and the technology young people use today. But most market research is totally bunk because of the survey junkies who participate in online panels- they don’t accurately represent the ideal consumer. So we’ve been recruiting a more upscale, educated, and technologically friendly group of people virally (everyone at my office sends an invite to their friends who send it to their friends, etc.) to take a short survey on these topics. The results will help large media companies see that while it appears they’re serving the U.S. so well, the people who don’t traditionally participate in market research are NOT being served. I used a Facebook and MySpace profile to recruit people to recruit their friends, and it’s working well, because there are cash incentives involved, but I need to find MORE places to recruit these folks. Any ideas? Where do young techies hang out these days?If you know anyone age 12-34, please pass this on to them. (Sorry, anyone else is too old) more importantly, if you know where else to find these people in their natural habitat, please let me know!


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