How They Did It

Everyone who reads this blog knows that I love YouTube and am pleased that the founders got such a great outcome for themselves. I posted that last week.

I was going to leave this subject to others and move on to more interesting stuff today, but my friend Al suggested that I re-run this post I penned in early May of this year called How YouTube Kicked Google's Ass (and everyone else's too).

I told him it's going to look like "I told you so" and I don't want to do that. He said that the bit about how they did it is worth adding to the conversation that's going on today about the deal.

So here's that part. I hope you like it:

YouTube wasn't first and they didn't beat the big guys to market. But they did do three things, that in combination secured them a leadership position that to me looks pretty unassailable.

First they launched with a really slick flash player that almost everyone else has now copied. They bet on flash and they were right. For video playback on the web, flash is the way to go.

Second, they provided immediate playback. When Google Video launched, I uploaded a video and had to wait for days to see it playback.  Needless to say, I've never uploaded another video to Google.

Third, and this is the biggie, they provided an easy way to embed their flash player and a specific video in another web page. This too has been copied by most everyone in the online video business. But if you go back and look at YouTube's traffic, the day they let people embed their videos in MySpace pages is the day they took off and never looked back.

If you want to read the entire post, click on the link above. There are some great comments to the post as well.

Now, on to other stuff.

Comments

[Andy]

I love statements that start with "I hate to say I told you so, BUT..." :)

To me, the most interesting thing to come out of this is that Google bought a company that they were already actively competing against.

Correct me if I'm wrong, but it seems like every other Google aquisition has been of a company that had a product or service that Google wanted in their suite, but didn't think they could develop any better themselves (Dodgeball, Writely, etc)...

Some humility from the 800 lb Gorilla?

[John Dodds]

Being a non-techie, I'm not sure I'm reading this right. You suggest that many have copied aspects of their technical solutions. Are you saying that YouTube has no real technological advantage over potential competitors?

[ali]

today I satrted a seperate blog and I mentioned your name, hope you don't mind
http://babelous.blogspot.com/

[Michael Urlocker]

I understand that for a VC, or for an entrepreneur, or even for a dreamer, YouTube just went to heaven. And that's great.

YouTube has some great attributes that mainstream media does not:

* Immediacy;
* Drama;
* Relevance to normal lives;
* Social commentary;
* Universality.

Is that worth $1.6 billion? For me, it is hard to say yes, because YouTube has no base of paying customers. For all the hype of Web 2.0 and other nonsense, there is no better indicator of a bad business than an absence of paying customers.

YouTube has a tremendous potential. I think it could become as important as CNN. And it may become an advertising venue. But so far, this is all only potential.

The challenge ahead is for Google to convert a potentially disruptive form of media into a real business.

For some questions Google, or any mega-acquiror faces, check here:

http://www.ondisruption.com/my_weblog/2006/10/16bmerger_whats.html

[PRoales]

What was really suprizing with the YouTube deal is that Sequoia potentialy realized over a 14,000% IRR on the deal. Simply incredible..

($3.5 in on 11/1/05, $8M in on 4/1/06, $1.6B out on 10/10/06)

[JL]

PRoales, it's not 1.6B out.
Sequoia picked up ~ 30% of that 1.65B.

[davis]

I find it interesting that so many people think that YouTube was the first in this category. Does anyone remember the companies that did this first? I specifically remember spotlife and videoshare out of California and iclips out of new York. I believe iclips even had a videosharing feature tied into yahoo in the early 00s.