Yahoo’s Missing the Boat on User-Generated Content
By Jeff Hilimire on Thursday, December 7th, 2006Wenda Harris Millard, chief sales officer at Yahoo, isn’t quite getting the whole user-generated content thing. And that’s not good for Yahoo as she’s pretty important over there.
Millard, in a recent story by Advertising Age, defines the success of YouTube as “a lot of page views. What was their revenue this year?” Well, bah humbug. As I read that quote I’m reminded of my junior high days when two kids would be in an insult fight (yes, we had insult fights) and finally when the “loser” couldn’t think of a good comeback he’d say, “Well, I’m rubber and you’re glue and anything you say bounces off me and sticks to you.”
The fact is, YouTube hasn’t been around for two years yet (started in February 2005) and it took Yahoo two years to make a profit. And sometimes to be a leader you have to break new ground, profits be damned, in order to cause enough disruption in an industry to set yourself apart. Yahoo used to know that, but now that MySpace and YouTube are getting all the attention and they aren’t the media darlings anymore (Google took that from them years ago), they have to get defensive because they have nothing to contribute to the conversation.
My favorite part of the article is when she’s asked about viral campaigns and social marketing and she isn’t very impressed with them saying, “I have a 19-year-old and a 17-year-old, and they don’t want to be [MySpace] friends with the Burger King king“. Gosh, I wish I had known that the Millard kids represent the pulse of America’s youth. We could have saved all that time on surveys and research and just given them a call. I guess the 134,000 people that ARE friends with the Burger King king on MySpace are insignificant.
Ah, I love the smell of sarcasm in the morning.
I wouldn’t worry much about what she thinks. Yahoo will get it and they’ll either buy someone or create their own features to help them compete with YouTube and MySpace.
AOL already did it (I just started seeing their TV ads for their version of YouTube). I doubt Yahoo’s site could be far behind.
Dear Jeff,I must say that I enjoy your blog and the delightful touch of sarcasm which makes my mornings brighter. I have a deep respect for your business, for you have created one of the leading firms in internet marketing and usability. However I am not sure I agree with you completely on this subject matter. Mind you I have not slept in two days, so my thoughts may be a bit scattered, however I will try my best to portray a Yahoo that you may not realize, and then discuss why I do not approve of their actions.
In a recent article on slashdot.org (I hope you have html in replys enabled, or this could get messy) They discussed Google’s secret monopoly, though the article was a good read, what interested me most was a secondary link that highlighted the major acquisitions by Microsoft, Yahoo, and Google over the past five years. If you will notice, Yahoo has desperately been attempting to catch up to the communities which rely heavily on user submitted content and social networking.
A brief summary if you will:
Since September of 06
September:
Yahoo purchases Jumpcut Jumpcut.com A social networking site similar to youtube.com but with a smaller userbase
October:
Google purchases youtube.com for 1.65 BILLION in stock options
Google purchase www.jot.com (a social collaboration site for online work that was implemented into google Doc’s and Spreadsheets)
November, Yahoo purchase three social networking sites,
Bix.com – allowing users to created and judge online contests
MyBlogLog – a live journal esque site
KentWorks – a creator of mobile software.
So as we see, Yahoo is attempting to enter the market, and in a big way with these acquisitions. But here is my question to you, WHY? Why do they have to? Where is the money? I am no computer programmer, I am in real estate by day and a geek by night. Google paid 1.65 BILLION in stock for youtube. Are you telling me they paid that much money for a product that have never made a profit? I have not seen this kind of action since 1999. Now yes, Google is flush with cash, as is Yahoo, but who says they have to move into this risky frontier. I use google for search, what about you? What ever happened to altavista.com Man, back in 1998 that is all I would ever use, it was the best of the best. And look at it now, who is to say youtube or myspace will not be the Bomis of the 2000s (yes, I was a fan of the boomis webring).
I wonder what goes through the heads of the CEOs and CFOs when they compute a purchase price. What is their anticipated ROI? What is their payback period? Is it sustainable? We are not talking about picking a Ford or GM car that a customer has to live with, we are talking about 5 minutes and a few mouse clicks from moving to an entirely new site.
One thing that upsets me is to see these massive sums paid for these acquisitions. If you pay $300,000 for a Ford Taurus, sure, you might give it a $500 paint job from AAMCO, but chances are you are going to be so cash strapped you are going to keep it running and not deck it out with a new engine, a new stereo and a set of rims. Myspace is that overpriced Taurus. It is by far the worst designed website ever created, yes I have an account, yes I prefer facebook. Fox spent so much money purchasing myspace, they are no longer interested in innovation, simply sucking the money out of it. Myspace has massive database problems, downtime, poor programming, and horrible implantation. For instance, this blog by “tom” is exactly the problem I am talking about. Myspace was acquired for hundreds of millions of dollars, are you telling me that they can not afford Photoshop to draw a circular line around the address bard and had to use MS paint to do it? I would fire an employee for doing such a half ass job. What would you say if an employee published a blog . And let’s not even get into the problems with their inability to control phishing. Sorry for their rant, but I do not think that these large sums are worth what they are getting in return. Perhaps they do it simply because they are afraid of patent and copyright infringement, ok, I will give them that. But for the funds that Google paid for Youtube, they could implement a high definition streaming service that would pay users for page views… and so what if it lost money? Youtube.com loses millions every month. Forgive the math here… I am tired, but let’s say you spend $50 million to create an awesome site, and you provide profits based on views, you are left with 1.6 Billion Dollars, lets say you have 200,000,000 registered users, but of that only 100,000,000 share (now I am simply making up figures here, for some reason I doubt that 1/3 of all American’s are regularly posting on youtube.com), but I feel like being generous. So let’s say you dedicate that remaining money to dividends to viewers. With the remaining money, you can pay out people, A LOT of people. That’s $1,000 per person posting content… now of course it would not be a flat payout across the board, the starwars lightsaber kid might get $20,000 while the guy stripping to the newest Paris Hilton monstrosity gets $.50 (as if Paris Hilton singing was not bad enough already). The point? If you are giving away money for something people like doing already, they are going to flock your way.
So very very long and tired rant short. I have no problem with Yahoo stepping out of the social-networking and video broadcasting business till:
1) Copyright laws are more properly settled and deals are stuck to better understand the rights of owners to the content that user share, thus eliminating potential costly lawsuits from the RIAA, and individuals (I want to make sure it’s the star wars kid that gets money for his dance and not some random guy who posts “a copy” of the video).
2) Another firm learns to make social networking profitable, copy their model and jump on the bandwagon (and no, myspace.com is not making money, it might show positive revenue, however I doubt the full ROI will ever be realized). I think that facebook.com might show a profit, but it is private, so no one knows.
3) Congress settles the net neutrality (issues with ISPs wanting to throttle bandwidth to certain websites), if you are going to sink $450,000 into a Mercedes-Benz SLR Mclaren (fastest production car in the world), and you can only drive it under 30 miles per hour what’s the point? Same goes for youtube, you got a site, but it takes so long to get to it no one bothers.
4) The bubble blows. I personally see 2001 coming again, I think we are on another internet bubble and everyone is afraid to say it. I think Google stock is severely over hyped, yes, they are pros at innovation, but they are even better at losing money (40% of their revenues still comes from ad-words), so in two years hopefully items #1 and #3 will at least be closer to resolve, #4 happens, and you pick up the same investment as Google and Fox for cents on the dollar.
Sorry for making that so long, I hope the HTML works properly
David