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James Dean famously starred in the 1955 move “A Rebel with a Cause”. I’m no rebel but I do pride myself on being something of a curmudgeon from time to time, always keen to (hopefully) talk some sense amongst the evangelism that seems to typify our industry.
Visiting the recent Web 2.0 Expo in San Francisco I was really interested to see the impact the recession had since my last visit to The Valley six months ago. Specifically I was looking for changes in product offerings, the focus on utility and monetisation and the adherence (or otherwise) to Tim O’Reilly’s famous pleas to “make stuff that matters”.
I was a little disappointed to see, rather than a bunch of start-ups looking to feed the world, or cure cancer, instead the usual suspects of YouTube competitors and social media aggregation services. The former in particular got me really riled – and I was reminded of this the other day when reading Brandon’s excellent post about the drag that YouTube is putting on Google’s finances. Brandon combined some back-of-napkin math, along with an engineer’s analysis and came up with the following figures to demonstrate what this drag means in real terms to Google;
|P/E Multiple||27.86 x|
|Loss Per Year for YouTube||$ (470,000,000)|
|Implied Market Cap Impact||$ (13,094,200,000)|
|GOOG Market Cap||$ 117,000,000,000|
|Price Per Share||$ 370.00|
|Number of Shares||316,216,216|
|Price Impact of YouTube||$ (41.41)|
(The original figure of a $470 million annual loss came from this Credit Suisse estimate).
Now I’m no market analyst, remember I’m just a simple curmudgeon. But I’ll write here what I said to people who would listen on the expo floor at the Moscone earlier this month – if Google, who famously found revenue in areas other wouldn’t have thought of, is unable to break even with YouTube, let alone turn a profit – where does that leave new entrants?
If YouTube with its overwhelming traffic, incredible market share and mass market reach, is a half billion dollar a year money sink then why on earth would anyone even contemplate entering an area even remotely similar?
So give it up guys – don’t just work on something that matters but work on something that has at least a smidgen of a chance to succeed – and video sharing just doesn’t fall into that category.