Mark Cuban said: "Only a moron would buy YouTube" (due to the potential legal liability) and "There is a reason they haven't yet gone public, they haven't sold. It's because they are going to be toasted" and "Would Google be crazy to buy Youtube. No doubt about it. Moronic would be an understatement of a lifetime."

http://blogmaverick.com/2006/10/07/some-thoughts-on-youtube-...

It was almost universally ridiculed as being far too expensive. Analysis was done in every other article about how Google would never be able to pay for the acquisition with YouTube as a business.

Eight years later, it's more than clear that YouTube was a steal for Google at $1.65 billion. It's worth 10+ times that today.

A 10x valuation still puts it at less than WhatsApp. If WhatsApp is worth $19b, then I'd wager that Youtube should be worth significantly more.

EDIT: I'll expand with a few dot points

- Youtube has an unimaginably huge content library

- Youtube has a solid monetization strategy

- Barrier to entry is significantly higher than a messaging app

- Youtube is even more synonymous with video streaming than WhatsApp is with messaging (anecdotally, my grandparents use Youtube. They don't even have smartphones, let alone WhatsApp).

The aggregate benefit of not having WhatsApp in a competitor's hand + the benefits to their core business of owning it + the lifetime profitability of WhatsApp + some other factors I'm probably forgetting <= a value of 19B in mostly Facebook stock.

The verified phone numbers of 800 million people [1] and the ability to act as a gateway drug to other Facebook services [2]?

[1] https://en.wikipedia.org/wiki/WhatsApp

[2] https://en.wikipedia.org/wiki/WhatsApp#Acquisition_by_Facebo...

Most startups would drop in valuation significantly if they made even one penny.

This kind of stuff sounds EXACTLY like what people were saying during the first dot-com bubble. Did you mean that ironically perhaps?

The reason they're valued so highly isn't because of how much money they would make, but how much value they would bring to an already profitable company. Those valuations aren't based on the idea of profits, but on the idea of being bought out by a bigger player. If they started making money on their own, that value would drop massively.

YouTube has revenue about ~20% less than Netflix, and is supposedly profitable according to articles from late 2013. Netflix is worth $33 billion, and has something like 57 million paying subscribers.

I believe the paying subscriber base, ie a superior business, gives Netflix a valuation edge, along with higher sales. Netflix is also rapidly building large international subscriber base that will be incredibly valuable over time, to go with their custom content (DareDevil, House of Cards, etc).

10x for YouTube would be $16.5 billion. YouTube isn't worth dramatically more than that range, the ceiling is clearly Netflix. So $15 - $25 billion is fair imo as a broad range.

But I mostly wanted to say, youtube is pretty fucking great.

But I suppose it doesn't matter in the big scheme of things. Why take the risk of someone buying YT and maybe getting more traction? A billion dollars doesn't matter enough, long term.

Or look at Groupon, which hasn't really done better than Google's $6BN offer - that didn't work out spectacularly for Groupon. Imagine if Google used a few billion to get people using its deals site. They could spend millions a day subsidizing deals for a year or two just to build traction. Yet they still offered 6BN.

One of the huge downsides of Google Video from a consumer side was that videos took 3 - 5 days to upload as they were proactively being checked for copyright infringement. Google probably never could have gotten away with the laissez faire attitude towards copyright infringement that a young startup like Youtube which is why it made sense for them to buy it, regardless of the price.

The bandwidth costs still must be enormous and back then more so. Only a few companies had the clout to negotiate favorable prices for bandwidth.

Even now I am surprised that they are either making so much from ads or pay so little in bandwidth that they can do what Vimeo charges for free.

It's been a long time so I may be remembering incorrectly. OK, I just looked up the deal and it was done in stock and not cash. Sequoia invested $9M and received $516M as part of the deal.

I did see an article saying Sequoia planned to sell their Youtube acquired Google shares in 2007 (before the lock-out period for employees expires) but I'm not sure if the sale went through.

http://www.nytimes.com/2006/10/10/technology/10payday.html?_...

Let's make sure that quote is never forgotten.

I think it's rather the same with Google and YT. Google saw that video was going to be big on the Web but their Google Video experiment was suboptimal in implementation They saw that YT did it better and saw a future of integrating that technology with Google's other services, and it paid off.

The sooner someone disrupts youtube, the better the world will be.

P2P is not the answer. It may work for the 1% (popular videos), but for the 99% it does not provide a viable alternative for on-demand content... I don't want to wait 5 hours for a 3 year old how-to video to stream from a single seed with limited upload capacity :(.

E.g. Look at torrents. Popular ones are readily available, but obscure or old torrents will be lucky to have a single seed.

In a P2P world, if you're uploading a long tail video of your cat that only your family will watch, maybe it's up to you to "seed that torrent" - or more realistically, keep your machine running so that your peer can serve the content to theirs. It's the move from desktops to mobile and laptop devices that run only sporadically that is the real problem for P2P.

You can still self-host your own videos, but then it's hard to monetize them to pay for the bandwidth. Remember that this is a "two sided market": you have to bring viewers and video producers to it.

And the commercials are blocked successfully by AdBlock.

That seems like oversimplifying matters. The way Google automatically identifies infringing content is very much a technological issue, as well as the vast problems that it causes when it's wrong.

Because even if you assume DMCA is sufficient, at this scale what is the alternative? The content owners would essentially have to implement their own content ID like system to find infringing content (which they already do to some extent), but rather than having hundreds of different stakeholders implement a hundred different systems (or the same system hundreds of times) externally, it's simply more efficient to centralize it at the point where the content is stored. Not to mention that the more likely outcome would be a massive lawsuit rather than content creators bothering to implement this system on their own.

Also, if YouTube wants to make money, let's face it, they need content people really want, which is what the big content creators own. Pretty sure they have this content ID system to keep those folks happy.

The issues are still less technical and more legal or business-related.

There's a big difference between the claim that content owners would do something similar anyway to provide a basis for DMCA takedown notices and that it is more efficient for Google to do it for them and the claim that it is legally mandatory for Google to do it.

> Also, if YouTube wants to make money, let's face it, they need content people really want, which is what the big content creators own. Pretty sure they have this content ID system to keep those folks happy.

There's also a big difference between the claim that it is beneficial to YouTube in terms of positive relations with people it wants to do business with and the claim that it is legally mandatory for them to do it.

Good luck shipping something that doesn't work with YouTube. I'd say their position of power is greater than Netflix.

It is almost like another big company who refused, for years, to implement a PDF export function into their flagship word-processor product.

At some point, hosting video yourself on an aws instance will be feasible. Until then, we're probably stuck with YouTube.

TPB was floating this idea without funding almost a decade ago. it didn't take off because Cohen's Bittorrent Sync was implied to be open, and the project died in anticipation of the better (standard/trusted) technology.

It makes Google's decision to launch Chrome in 2008 much more of an obvious call.

The way he put it, he said Youtube got big Because Youtube initially allowed copyrighted material.

This led Youtube gaining more videos -> more traffic -> more videos -> repeat.

I dunno, sounds kinda like entrapment or framing to me...