What if the “crazy folk” who bought YouTube were actually at Microsoft? What would that have caused? I’ve been thinking about that while driving Patrick home. Now Maryam is driving and I get to write you my thoughts from HWY 1 near Pacifica. Hopefully we don’t go over Devil’s Slide, although that’d probably make LayZ happy.
Anyway, what if?
Last year I was at Google’s Zeitgeist conference. That’s where Google’s best customers (er, advertisers with big bucks) showed up. Later I was at MSN’s similar deal. I met advertising buyers from Kraft. Procter and Gamble. GM. And lots of other big companies.
What could have Microsoft done with YouTube?
Used it as a wedge to get into Google’s search and charge per click advertising.
Well, one buyer from one of these big companies could buy hundreds of millions of dollars of advertising.
Now how much of GM’s media mix in 2010 will be done in online advertising? Let’s pick a number out of the air and say 55%. That’s not unreasonable, is it? After all, someone who is willing to watch a video is a better advertising candidate than someone who’ll just read text.
Why do I say that? Well, past behavior. Is TV advertising more effective or newspaper? I tend to remember that advertisers will pay millions for a one minute SuperBowl ad but the San Jose Mercury News doesn’t even charge $100,000 for a full page. Yeah, not quite a fair comparison, but a TV ad is often more persuasive than a newspaper one, especially for things like cars.
Anyway, it’s pretty clear that billions are gonna be spent on video services like YouTube. Now, imagine that one of these ad buyers comes into a Microsoft salesperson’s office.
“Hi, I’d like to buy $100 million worth of ads on YouTube for these keywords.”
“Oh, that’s awesome. Hey, did you know we’re running a promotion where you can also get those keywords over on our Microsoft Advertiser Points program too for a minimal investment?”
Now, why does that matter? Well, see, once you build a relationship with an ad buyer, getting him or her to also put those same ads on Xbox, Live.com search, MS-sponsored blogs, and other places, is real easy.
Let’s turn it around and look at decisions bloggers will have to make over the next few years. Which ad system should I run if I were to use one? Well, of course I’ll go with the one that has the most advertising.
So, if Microsoft had bought YouTube, they would have built relationships with advertisers, would have gotten those advertisers to also put their stuff on Microsoft’s blogad programs, which would have gotten me to chose Microsoft’s advertising bar instead of Google’s.
Ahh, so that’s what Google is getting with its $1.6 billion. It is building a moat around its advertising sales force and saying “you can’t get your hands on our advertisers.”
It also told every blogger and videoblogger in the world “deal with us, we’re gonna make sure the best advertisers stick with us.”
Heheh, and it gave Eric Schmidt another way to poke Bill Gates in the ribs. What could be better than that?
UPDATE: Todd Bishop of the Seattle PI also wrote about this and did some analysis. Looks like Microsoft thought the price was too high. That’s been the strategy lately. Don’t buy best-of-breed — copy those — and buy stuff that’s more reasonably priced. Thing is, a copy of YouTube won’t have the audience (Microsoft still thinks it can build a big audience by cloning the technology. Hey Steve Ballmer, that strategy won’t work! You can’t clone the Beatles — this is NOT a technology-only play!)
No audience, no way to get advertisers to join your ecosystem.