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21st Century Bust

astorm

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At some point in the near future, the YouTube investors are going to cash out, selling their little phenomenon to the highest bidder and setting into motion the steps that will lead to the next big tech bust.

This high bidder is going to wrestle with their new property for a bit, lets say 6 months, trying to come up with a way to justify whatever ridiculous price they paid. The two obvious solutions are

  1. Traditional Internet Ads

  2. TV/Movie Media Partnerships

Choice one would bring down the wrath of The Networks™, forcing YouTube to start heavily restricting the type of content they allow to be uploaded. In other words, they’d have to enforce copyright laws or spend a lot of time in court. Or, like Napster or AudioGalaxy, enforce copyright laws and spend a lot of time in court. YouTube, like the old audio sharing networks, is a phenomenon that relies on abusing the existing copyright landscape. Without this content, they don’t have the traffic, and the ads don’t make enough money to justify the investment.

Choice two would mean getting into bed with the “old media” content producers. The only company that’s been able to negotiate reasonable terms with these folks is Apple Computer, and the iTunes music store reportedly doesn’t make that much money. It’s a promotional tool to sell iPods, which reportedly do make a lot of money. So, even if YouTube manages a deal that lets people continue to upload episodes of their favorite TV shows, they exist at the whim of The Networks™, which means a series of un-or-barely-profitable blunders that still don’t justify the investment.

Choice three doesn’t exist, because any entity that could come up with the kind of money needed to buy YouTube isn’t known for it’s creative thinking.

It’s also possible that YouTube continues on alone into uncharted water, believing it’s own hype. Ask Friendster how that worked out.

So, in my grim future, YouTube ends up being a bust. Right or wrong, the irrational exuberance talk starts circulating. This bad will extends like a virus, first to to all the user-generated content companies, and then to anything that’s been branded Web 2.0.

Investors begin to demand instant unreasonable turn-arounds from the ill-conceived startups and refuse to fund anyone new that can’t show an instant profit.

The feeding frenzy started, someone writes an expose on a hooker/cocaine party held by some Los Angeles or New York City based “Completely Legitimate Internet Marketing” company. This leads people to investigate just how much money the search engines are making from companies living in a sooty ethical cloud.

Ad networks collapse overnight as the sketchy folks take their punch drunk monkey and run. Google’s stock price drops to a reasonable level. The crazy money leaves the internet. Again.

Boom is over.

Originally published July 31, 2006

Copyright © Alan Storm 1975 – 2017 All Rights Reserved

Originally Posted: 31st July 2006