Thursday, December 07, 2006

Google Eats YouTube

By Uncle Cheng

Imagine the scene. A group of young executives wearing jeans and short-sleeve T-shirts working from a converted garage littered with empty Starbucks polystyrene cups and Big Mac wrappers. All of a sudden they find that their start-up business, which has little or no revenue, is worth HK$13 billion. Is this another 2000-style dotcom madness? I am of course referring to YouTube. If you don’t know what YouTube is, ask any kid.

I must admit that when it comes to the internet I am a happy novice and spend more hours with legal textbooks like Archbold (a sort of bible of the criminal law) than surfing the web. But ideas like Google and YouTube still intrigue me.

In the old days companies grew slowly and steadily and you could follow their progress year by year, even decade by decade. But the internet has changed all that. Firms like Google arrive like a meteor from heaven, their valuation exploding like someone with a massive nosebleed.

The experts in Silicon Valley seem to think the YouTube phenomenon marks the internet’s second stage, or what they call “Web 2". The old “Web 1" was just getting online and looking up stuff. The difference is that “Web 2" puts the user in control.

This is what YouTube does. It puts you the user in control. You make your home movie, upload it to YouTube, and then anyone anywhere can see it for free. You don’t get paid a cent but you can at least feel like Chen Kaige or John Woo. In this way YouTube overnight acquired a viewer population of hundreds of millions.

Now why didn’t I think of that? In fact, I nearly did. Well, I am almost sure I did. Anyway the YouTube phenomenon is a message for us all. Here was another huge new business set up in a Californian garage. The solution is simple. I am going to set up an internet business selling Californian garages, and then I will sell it to Google for billions.

Thinking about YouTube may numb your mind but consider this. Former US Vice President Al Gore has started something called Current TV which promises to “democratise television” by allowing viewers to produce and broadcast their own films, programmes, or whatever they want. Where will this all end? Will viewers be able to make their own news?

All this reminds me of the old worry in newspaper offices that the best material is written by the readers and appears on the letters page. Similarly, phone-in radio shows have proved so successful because they are user-generated. The same phenomenon is coming to television, which has been trying to get close to its viewers for years via reality shows, soap operas, quizzes, talent shows and “send in your funniest video” programmes.

So was Google mad to fork out such a vast sum for profitless YouTube? When you think about in terms of the democratisation of information and entertainment, my answer is no. This was a clever strategic investment. On the other hand Google has been behaving very oddly recently. It has threatened publishers with destruction by putting entire books online for nothing, and sending out lawyers' letters to anyone who uses `google' as a verb.

The truth is the more you think about Google, the more it leaves you feeling, well, googled. Just think of it. Google is still only eight years old. It ranks as the 31st biggest company in the world. Its capitalisation is HK$975 billion. It is bigger than Coca-Cola.

Is Google a corporate monster or the ultimate ultra-cool start-up?

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