What if Microsoft bought YouTube?

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.

Huh?

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.

Comments

  1. Robert, I like the speculation. For a long time, Microsoft has played the role of villain, and I think as Google gets bigger, it’s going to become more clear that it’s hard to separate companies into camps of good and evil. It’s simply a business – and an incredibly competitive environment to establish new routes to capital. I am hoping that Google doesn’t fall under tremendous copyright-related scrutiny by aggressive lawyers out to collect from their cash pile.

    On another note, I finally wrapped up “Naked Conversations” this weekend. It’s a must-read book for any marketer, PR rep, or business executive. I appreciate the effort you went through in putting it together and enjoyed it.

    http://www.louisgray.com/live/files/naked_conversations.html

  2. Robert, I like the speculation. For a long time, Microsoft has played the role of villain, and I think as Google gets bigger, it’s going to become more clear that it’s hard to separate companies into camps of good and evil. It’s simply a business – and an incredibly competitive environment to establish new routes to capital. I am hoping that Google doesn’t fall under tremendous copyright-related scrutiny by aggressive lawyers out to collect from their cash pile.

    On another note, I finally wrapped up “Naked Conversations” this weekend. It’s a must-read book for any marketer, PR rep, or business executive. I appreciate the effort you went through in putting it together and enjoyed it.

    http://www.louisgray.com/live/files/naked_conversations.html

  3. [...] Opportunity cost of not owning YouTube: a competitor would have purchased it, first. Fox had already purchased the young Myspace eyeballs; and Microsoft is serious about the online world and has all those XBoxen, Vistas, Zunes to capture other eyeballs. YouTube was obviously on the block for sale, and each viewer is valued at US$0.0452. US$1.65B is not too much compared to a competitor getting the brand. YouTube maybe the “text breakout” and single product weakness that dogged Google in recent months. (Robert Scoble has a perspective on this, too) [...]

  4. Seriously, does anyone really care what MSFT is or isn’t doing on the Internets today? MSFT had 3+ years to respond to Apple in digital music. Recall alll the bravado and whispers of impending knock out by Amir Majidimehr and underlings at MSFT. Zune is what we get after three years and perhaps billon bucks of MSFT shareholders’ money? I think Wall Street is not the only place where MSFT is zuned out of attention. Salesguys!

  5. Seriously, does anyone really care what MSFT is or isn’t doing on the Internets today? MSFT had 3+ years to respond to Apple in digital music. Recall alll the bravado and whispers of impending knock out by Amir Majidimehr and underlings at MSFT. Zune is what we get after three years and perhaps billon bucks of MSFT shareholders’ money? I think Wall Street is not the only place where MSFT is zuned out of attention. Salesguys!

  6. “I never thought I’d agree with you. But I do.”

    That’s progress. But, your next mission should you accept it, is to rely less and less on MSFT for blogging material. Transition out of it. Raise your credibility. Feel freer. MSFT is yesterday’s news and I don’t see much that can change that, Ozzie included.

  7. “I never thought I’d agree with you. But I do.”

    That’s progress. But, your next mission should you accept it, is to rely less and less on MSFT for blogging material. Transition out of it. Raise your credibility. Feel freer. MSFT is yesterday’s news and I don’t see much that can change that, Ozzie included.

  8. Anona: well, I don’t live in Redmond anymore. But, Microsoft does still have huge economic power and, could, if it wanted to, make things very interesting again very quickly.

  9. Anona: well, I don’t live in Redmond anymore. But, Microsoft does still have huge economic power and, could, if it wanted to, make things very interesting again very quickly.

  10. “if it wanted to, make things very interesting again very quickly.”

    That’s very much debatable. Like I said, MSFT said digital music/DRM was a crucial piece of its consumer future and they had the money and the time. The result? Beyond lackluster. Ditto for search, advertising, blogging, portals, web presence, etc. MSFT was promising “killer” apps/strategies/services/etc. They pretty much failed everywhere. This management, under Ballmer, can’t deliver. Period. So that notion that they can just step up is nostalgic at best.

  11. “if it wanted to, make things very interesting again very quickly.”

    That’s very much debatable. Like I said, MSFT said digital music/DRM was a crucial piece of its consumer future and they had the money and the time. The result? Beyond lackluster. Ditto for search, advertising, blogging, portals, web presence, etc. MSFT was promising “killer” apps/strategies/services/etc. They pretty much failed everywhere. This management, under Ballmer, can’t deliver. Period. So that notion that they can just step up is nostalgic at best.

  12. if Microsoft had bought YouTube, they would have driven it straight into the ground, Microsoft’ing it, Passporting it, MSNing it, DRMing it…

    If 30 years of history isn’t enough proof, the far-corner of the country Redmondites can’t do content deals, stick with software, and hardware with $5 billion dollar (and counting) price tags. Clunk out Vista finally (repeating not the trainwreck for the next version) and make Office 2007 the best Suite ever, everything else is fluff.

  13. if Microsoft had bought YouTube, they would have driven it straight into the ground, Microsoft’ing it, Passporting it, MSNing it, DRMing it…

    If 30 years of history isn’t enough proof, the far-corner of the country Redmondites can’t do content deals, stick with software, and hardware with $5 billion dollar (and counting) price tags. Clunk out Vista finally (repeating not the trainwreck for the next version) and make Office 2007 the best Suite ever, everything else is fluff.

  14. Cloning the technology is not enough, you have to out-market it. And it’s possible, just not from Microsoft, if their entire company history is any roadmap.

    If Microsoft bought YouTube, they’d ink one-sided deals, cutting the other side out, which would start wars, resulting in lawyer-city. Playing nice with all suitors, all sides sharing the pie, never been their strong suit. They’d play the typical backstabbing political games, and no one would ever trust them, not that anyone does now. And that would result in lawsuits from here to eternity, not so much over the copyright issue itself (tho that would be the excuse), more the Adobeish/Symantecish way about it, the feeling that they are cheating you…

  15. Cloning the technology is not enough, you have to out-market it. And it’s possible, just not from Microsoft, if their entire company history is any roadmap.

    If Microsoft bought YouTube, they’d ink one-sided deals, cutting the other side out, which would start wars, resulting in lawyer-city. Playing nice with all suitors, all sides sharing the pie, never been their strong suit. They’d play the typical backstabbing political games, and no one would ever trust them, not that anyone does now. And that would result in lawsuits from here to eternity, not so much over the copyright issue itself (tho that would be the excuse), more the Adobeish/Symantecish way about it, the feeling that they are cheating you…

  16. I don’t think Microsoft has to be in *every* business. Why not ask, “Why didn’t Nabisco buy YouTube?”

    BTW, Robert, I saw similar analysis to yours regarding AOL’s purchase of Time/Warner, and look where that went.

    Google is spending like there’s no tomorrow (maybe they feel that they have no choice, because for all their PHDs, they’ve accomplished nothing outside of search; this purchase is admission that GoogleVideo is yet another failure), but that doesn’t mean the spending will pay off. You do things that make economic sense. Google’s rather operating out of fear (“Oh no! GoogleVideo isn’t working; we’d better buy YouTube or else someone else might buy it!!”). Google’s running scared; they must find some way, *any* way, to justify and prop up their over-valued stock price, no matter the expense, and at the same time must buy up the whole internet to block competitors.

    Google is so scared, it’s funny. They spend 0.9 billion for MySpace advertising rights out of fear that they’ll do a deal with Microsoft (Microsoft “played” Google on that one). Then they get scared that MySpace will use that money to buy YouTube, so spend another 1.6 billion on YouTube when they already have GoogleVideo!! LOL

    If Microsoft thought the price was too high, then it was. Microsoft has a hell of a lot more spending money than Google. Now Google must deal with the copyright issues. Mark Cuban (creator of broadcast.com, sold it to Yahoo, then bought the Dallas Mavericks with the money) doesn’t think this makes sense, particularly the copyright issues. He called Google “crazy” in his blog post today http://www.blogmaverick.com/2006/10/09/i-still-think-google-is-crazy/. Included in that post is the interesting tidbit that GoolgeVideo is trying to legally *sell* the very same copyrighted video that’s illegally available for *free* on YouTube. How does that work? I’ll take his analysis over pie-in-the-sky Google-can-do-no-wrong nonsense. You’ve been sucked into the Google worship cult; a cult of personality; you’re so *wowed* by the name “Google” that you can’t think straight.

    YouTube can easily be cloned, and likely will be cloned by some upstart company that wants to make a version that restores the freedom that YouTube has had, but will no longer have under Google. Once that happens, the users flock to YouTube and Google is out 1.6 billion. And what about the morale of those that worked on GoogleVideo? I’m sure this does *wonders* for them.

    As for Microsoft, they’ve lost their way by even trying to get into the content biz. They should split the company into about 5 parts. One of those parts can do “content” if they want, but there’s no need to try to do everything, or to do things just because Google is doing them. Trying to do anything and everything is Microsoft’s version of operating out of fear too. But they’re not nearly as scared as is Google, which is why Microsoft isn’t spending billions on easily clonable sites.

  17. I don’t think Microsoft has to be in *every* business. Why not ask, “Why didn’t Nabisco buy YouTube?”

    BTW, Robert, I saw similar analysis to yours regarding AOL’s purchase of Time/Warner, and look where that went.

    Google is spending like there’s no tomorrow (maybe they feel that they have no choice, because for all their PHDs, they’ve accomplished nothing outside of search; this purchase is admission that GoogleVideo is yet another failure), but that doesn’t mean the spending will pay off. You do things that make economic sense. Google’s rather operating out of fear (“Oh no! GoogleVideo isn’t working; we’d better buy YouTube or else someone else might buy it!!”). Google’s running scared; they must find some way, *any* way, to justify and prop up their over-valued stock price, no matter the expense, and at the same time must buy up the whole internet to block competitors.

    Google is so scared, it’s funny. They spend 0.9 billion for MySpace advertising rights out of fear that they’ll do a deal with Microsoft (Microsoft “played” Google on that one). Then they get scared that MySpace will use that money to buy YouTube, so spend another 1.6 billion on YouTube when they already have GoogleVideo!! LOL

    If Microsoft thought the price was too high, then it was. Microsoft has a hell of a lot more spending money than Google. Now Google must deal with the copyright issues. Mark Cuban (creator of broadcast.com, sold it to Yahoo, then bought the Dallas Mavericks with the money) doesn’t think this makes sense, particularly the copyright issues. He called Google “crazy” in his blog post today http://www.blogmaverick.com/2006/10/09/i-still-think-google-is-crazy/. Included in that post is the interesting tidbit that GoolgeVideo is trying to legally *sell* the very same copyrighted video that’s illegally available for *free* on YouTube. How does that work? I’ll take his analysis over pie-in-the-sky Google-can-do-no-wrong nonsense. You’ve been sucked into the Google worship cult; a cult of personality; you’re so *wowed* by the name “Google” that you can’t think straight.

    YouTube can easily be cloned, and likely will be cloned by some upstart company that wants to make a version that restores the freedom that YouTube has had, but will no longer have under Google. Once that happens, the users flock to YouTube and Google is out 1.6 billion. And what about the morale of those that worked on GoogleVideo? I’m sure this does *wonders* for them.

    As for Microsoft, they’ve lost their way by even trying to get into the content biz. They should split the company into about 5 parts. One of those parts can do “content” if they want, but there’s no need to try to do everything, or to do things just because Google is doing them. Trying to do anything and everything is Microsoft’s version of operating out of fear too. But they’re not nearly as scared as is Google, which is why Microsoft isn’t spending billions on easily clonable sites.

  18. “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!)”

    Hmm… so Ballmer wants The Beatles but is going to end up getting The Monkees? (ducking to avoid the flying chairs ;)

  19. “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!)”

    Hmm… so Ballmer wants The Beatles but is going to end up getting The Monkees? (ducking to avoid the flying chairs ;)

  20. [...] Según Scoble “no se puede clonar a Los Beatles”; pero hay dos detalles que me hacen pensar que quizás se puede, MS sigue teniendo un dominio gigantesco de los desktops y de los “hooks” entre Internet y el usuario comun con sus accesos directo, y tiene más cash que sus 5 competidores directos juntos…. y ¿cuanto tiempo más va Google a ser el niño mimado de Internet si sigue creciendo a este ritmo? Porque hoy en día parece que los grandes son solo 3… o 4 [...]

  21. “Don’t buy best-of-breed — copy those — and buy stuff that’s more reasonably priced”
    Yeah, that worked wonders with FrontPage. I gave up on it not being an inconsistent turd after, oh I dunno, 5 YEARS!

  22. “Don’t buy best-of-breed — copy those — and buy stuff that’s more reasonably priced”
    Yeah, that worked wonders with FrontPage. I gave up on it not being an inconsistent turd after, oh I dunno, 5 YEARS!

  23. [...] In December, I made a number of 'predictions' for 2006.So far, I think I'm doing pretty well…On the 'YouTube' prediction I wrote:"Youtube will buzz right off the scale" To be honest, this really was no brainer…if you too played with YouTube at all last year, it would be clear that it was destined for great things. As it's turned out, it has been a phenomenal year for the company, but they've surpassed even my expectations, by about a billion. Mark Cuban thinks Google is crazy. Maybe so - but maybe anyone who wants to organize the world's information and make it universally accessible and useful has to be.(btw, congrats to Michael Arrington for the confirmation of the rumour)Update: Check out this video of the two founders of YouTube announcing the Google aqcuisition on, er, YouTube.Update II: Scoble asks: "What if Microsoft had bought Google?"Update III: Here's the conf call transcript. Posted: Monday, October 09, 2006 10:38 PM by alexbarnett Filed under: Bubble 2.0 [...]

  24. Why the heck Google did this ?

    Larry or Sergey were able to buy this website for their pocket money and keep their source of income safe from lawsuits.

    BTW, 1.6 bln in overpriced Google stocks is not same as real hard cash. So this can be smart move.
    1.6 bln in Microsoft stocks will be clearly unfair – as this is company that actually produce something (and do so for long time).

  25. Why the heck Google did this ?

    Larry or Sergey were able to buy this website for their pocket money and keep their source of income safe from lawsuits.

    BTW, 1.6 bln in overpriced Google stocks is not same as real hard cash. So this can be smart move.
    1.6 bln in Microsoft stocks will be clearly unfair – as this is company that actually produce something (and do so for long time).

  26. Robert, I’ve been saying for a long time that MS doesn’t understand the content business. I know that sounds harsh, but it’s true.

    Yahoo does. Google does. Studios do. Networks do. If you don’t agree, then look at their bottom line. Look at the numbers. Whoever has the audience, has it because they understand content.

    The reason Microsoft is IN the content business is because there’s no other way to launch a video game console. Not really because they want to. And unfortunately not because they understand the potential of content to draw customers, and attract advertising $$. Otherwise they would have taken a much more aggressive approach 2-3 years ago.

    This is what you call “a slow wake up.”

  27. Robert, I’ve been saying for a long time that MS doesn’t understand the content business. I know that sounds harsh, but it’s true.

    Yahoo does. Google does. Studios do. Networks do. If you don’t agree, then look at their bottom line. Look at the numbers. Whoever has the audience, has it because they understand content.

    The reason Microsoft is IN the content business is because there’s no other way to launch a video game console. Not really because they want to. And unfortunately not because they understand the potential of content to draw customers, and attract advertising $$. Otherwise they would have taken a much more aggressive approach 2-3 years ago.

    This is what you call “a slow wake up.”

  28. Google spends $1,650,000,000 on YouTube

    How much? It’s IT Blogwatch, in which Google buys YouTube. Not to mention a Halloween supper party with creepy, but 100% tasty and edible courses…

  29. Ventures Capital – A Challenge For Life Science Investors

    Imagine you’re a venture capital group that invests in both life science companies (biotechnology & pharmaceuticals) and software companies. If you’re successful in both areas, the chances are that the software side of your business …

  30. I think Microsoft is the unfortunate victim of a double-standard on things like this. And that’s coming from a guy who has been fairly critical of Microsoft on his own blog (jwikert.typepad.com)! Google buys YouTube and it’s considered a brilliant move and causing a major shift in the online media world. Microsoft buys them and everyone probably talks about how stupid it was, how Microsoft is exposing itself to all of YouTube’s legal liabilities, how Microsoft couldn’t build something exciting and had to acquire it, etc.

  31. I think Microsoft is the unfortunate victim of a double-standard on things like this. And that’s coming from a guy who has been fairly critical of Microsoft on his own blog (jwikert.typepad.com)! Google buys YouTube and it’s considered a brilliant move and causing a major shift in the online media world. Microsoft buys them and everyone probably talks about how stupid it was, how Microsoft is exposing itself to all of YouTube’s legal liabilities, how Microsoft couldn’t build something exciting and had to acquire it, etc.

  32. Microsoft is still suffering from the effects of its illegal monopoly activities in the 90s. Why did it take Microsoft 5 years to come up with a competitor to the ipod? Why has Microsoft still not put a search box on the start bar, 5 years after everyone realized that search was worth a huge amount of money? They seem to live in fear of further monopoly litigation.

  33. Microsoft is still suffering from the effects of its illegal monopoly activities in the 90s. Why did it take Microsoft 5 years to come up with a competitor to the ipod? Why has Microsoft still not put a search box on the start bar, 5 years after everyone realized that search was worth a huge amount of money? They seem to live in fear of further monopoly litigation.