YouTube + Google = Evidence of a Web2.0 Bubble?


Tristan Louis says there is no web 2.0 bubble, at least, not yet. His rationale is that if you look at the deals that have been done, most of them have been in the tens of millions, as opposed to hundreds of millions or billions. I'm surprised to hear Tristan say this, because he has been an advocate of the idea that a Web 2.0 bubble is building.

I disagree with him because I don't believe that the deal price is a good indicator. I also don't pay attention to valuations that deal with things like eyeballs and clicks and all that stuff that may never end up being monetized. I think the Google-YouTube deal is evidence that there is a bubble, and that Google knows their stock is overvalued.

  • Too many people are assuming that the proposition “Internet video is going to be really big” is equivalent to “The YT acquisition is a good deal for Google shareholders” and “Google stock is a buy.” Such equivalence is by no means automatic.

    What is Google’s “moat” in this market? It would be easy to come up with 10 companies, many of them quite competent and well-financed, who are interested in playing in this space. Why would the Google/YT market share in 5 years be 70% rather than 30%?

  • I think the acquisition will pay off in the short run. The reason is the pent up demand for a new answer to the old question, “Where should I spend my ad dollars?”

    Marketers are itching to defect. They’ve been disappointed by their newspaper, TV, radio, etc. ads for decades. “Maybe,” they will think to themselves, “maybe Google/YouTube has some magic.” Many will be just as disappointed with the results in the new media but before they find that out they will have spent billions trying to make it pay off.

    Look at the history of ad spending over the last 40 years and you’ll see the same pattern. The only difference here will be if Google (unlike the old media) decides to figure out how to make their media offerings efficient and effective.

  • Tristan

    I started with the idea of providing more supporting evidence to the NY
    Times piece (which is why I started putting together the list of deals)
    and was surprised, to be honest. So while I’ve been warning people about
    the potential for a bubble (something I tried and failed to do during
    bubble 1.0), I’m also cautiously optimistic. At the end of the day,
    it’s not about whether I’m right or wrong, but whether we all keep an
    eye on reality. During bubble 1.0, there were many signs most people
    didn’t heed (by 1999, I thought I may be wrong and not really “getting
    it” but, by 2001, I realize that the air had been toxic all along). So
    now, I’m trying to get people to look at things more critically.
    However, at the same time, I want to make sure that we don’t scream
    “bubble” when, in fact, there may not yet be one. I’m still convinced
    that we are heading down a bubble route (and hope that my comment will
    influence people on looking at things more critically than they did
    during bubble 1.0) but I’m also reasonably hopeful that people who went
    through bubble 1.0 are now more cautious.

    The truth of the matter is that bubble 2.0 would be a better story for
    the press: they love building a bubble and then popping it (if you look
    at the recent press, like the Digg cover in Business Week or the wild
    pronouncements about the potential of many start-ups, I fear that the
    press is trying to CREATE bubble 2.0). However, I’d like more people in
    our industry to carefully assess the value of companies and understand
    the real monetary impact.

    Many people were hurt by bubble 1.0 but many others saw great success as
    a result of it. I’d like the latter group to continue being successful
    while allowing the former to be OK. This may mean deflating some of the
    expectations but it also means being responsible and calling BS when a
    wrong call is made.

  • I don’t think that web 2.0 is dead.

  • What is a bubble?

  • David G

    It’s a mistake to totally discount either GOOG’s cash flow or YT’s growth rates. Obviously hyper-efficiency IS a trait of succesful online media companies – one their traditional media conterparts can not match. It’s wise to be skeptical about GOOG’s valuation and it’s ability to continue to deliver ROI but, there’s a lot to be said for momentum – and no-one else has it like GOOG and YouTube do. That said, the stock’s too rich for my blood.

  • The next step will most likely be internet TV not to be confused with IPTV(a delivery model for TV). The big 4 free TV channels provide content supported by advertisment using this model there is no reason why Goo-Tube can’t become the fifth network combining Google’s advertisment prowess with YouTube’s content and social network. Allowing users too create personalized channels of content paid for by video ads.
    Google + YouTube = Internet TV

  • So far the jury seems out on the immediacy of copyright implications here. Blogmaverick had an interesting take a couple days back… as did Stephen Colbert from the Daily Show. Thought they take different directions, they seem to agree that it spells trouble or at least irritation for Google :)