broadstuff

Ian Betteridge notes recent reports imply that YouTube could lose a small fortune this year:

As I mentioned earlier, a recent Credit Suisse report estimates it will lose a whopping $470 million this year.

The reason for that is simple: while its revenues should grow at a more-than-respectable 20% in 2009, the number of streams it serves will grow at a rate almost double that (38%).

As Credit Suisse estimates half of YouTube’s expenses come from bandwidth, this means that the growth in revenue is only just paying the bandwidth bill for the growth in traffic.

Add in all the additional costs in infrastructure, people (and now licensing) and it’s clear that it will have to sell a hell of a lot more advertising than 9% of inventory to bring it into the black.

Basically, at the moment, every time someone watches a video on YouTube, it costs Google about 10¢. Delivering ad revenue of 10¢ per view is going to be a really big challenge, even for Google’s mighty ad sales machine.

This is interesting, a piece of analysis we did last year estimated it would lose around $100m in 2008. As it stands, YouTube makes a loss on every new customer. A key driver of profit is the % of videos that have Ads served against them. We read elsewhere that YouTube is now making Ad revenues against c 9% of all videos sold, nearly double that reported last year.

The other critical factors are:

- revenues per Ad served, which we believe are falling globally and;

- cost of video serving. Moving to HDTV format increases required bandwidth by c 5x and this is a major proportion of cost today, and is flexed with volume.

We haven't recast our analysis from last year, but you can see how large increases in volume and in cost, and reduction in Ad prices will outweigh even a doubling of % Ads served and get to a number like $470m quite fast.

This is what the FreeConomic guys don't grasp - yes, bandwidth is cheap - but it is not free and it is consumed in huge volumes, and though no-one is paying YouTube et al directly for these services, these Web Video companies have to pay for pipe, port, power and ping......

Just as well Google made $1.4 bn in net revenues last quarter, if YouTube carries on as it is will need them all in a few years time......

Took the Easter weekend off to go hiking in the Lake District, and - with some trepidation - turned off all comms until arriving back yesterday evening. It is well worth doing, I've come to the conclusion that the "always on" culture fills ones head with a clutter of fairly unimportant things - driving a "continuous partial attention" mode that can potentially block the ability to see the bigger picture, or the main strands of any issue.

Its been quite interesting to come back this morning and read Techmeme for example - in one way everything has changed since last week, in another way nothing has. As you read it, a plethora of small things immediately pop up, jostling for position in the headspace. But last week it was another plethora of small things, and this week they are all gone. Which one of them changed the world in the last week? None, of course. You realise that it is possible to totally over-react without thought or reflection (see Clay Shirky's latest post explaining this with #Amazonfail for example) whereas a bit of constructive ignoring it would probably be far better.

Similarly, The News - after reading Dan Garner's book "Risk", I've come to understand that all media specialises in stories that are Now! Big! Risk! Fear! because nothing gets our caveman juices going faster - and thus gets our attention - than the tugging of our strings by the modern equivalents of Lion-In-The-Grass moments. But you come back off the mountains, and guess what - despite millions of acres of newsprint and TV watching hours expended, the big picture hasn't wavered at all - but I personally feel a darn site better because I haven't been given 10 new things to worry about before breakfast for the last few days.

OK, OK, I hear you say - thats all standard back-from-holiday stuff, whats it got to do with Tech/Media/Telecoms strategy - where are you going with this?

Firstly, that the always on world throws such a cornucopia of crap at you that its much harder to actually see whats going on. To use the mountain analogy - one of the reasons I suspect you do feel "on top of the world" is that you do get to see the big picture - your brain has a "metadata moment" as ot were. All the little villages etc are laid out below, you see how they interconnect, you can see how the land lies and so you instinctively understand how systemically the whole thing fits together. It means once you are down in the valleys and visibility is no more than round the next bend, you do actually "get" how it all fits together.

Secondly, that the modern comms ecosystem by and large rewards empty vessels making a lot of noise. I said nothing on this blog for nearly a week, nothing on Twitter, nothing on any medium. Guess what - traffic on the blog is down, rate of new followers on Twitter is down, Technorati links are declining (hugley - they must have had another rejigging of the system). OMFG! - I'm losing out in the race to grab attention! And yet, I now realise that the right approach, systemically speaking, is that if you have nothing new to say just to shut up and not add noise to signal. But that isn't going to happen due to the reward system, so you need to find a way to attenuate the noise

Which of course brings one to Filtering and the critical emerging role of the filter in todays comms ecosystems. We are already getting filtering of the "river of news" - Techmeme filters for example - but what is increasingly required is context based metafiltering, the ability to apply the "Top of Mountain" view that says that when correctly viewed, this Shiny! Now! Fear! thing is actually just another little blob on a path, like those cars are just shiny little dots going a long a road with many in front, many behind it etc.

So there you have it - the next big big thing will be filters that work like mountains. You heard it here first

Update - good continuation of the discussion on Nic Brisbourne's blog

Update II - as ever, Deirdre Molly has beaten me to this and has a really good post from SXSW 2008 and a host of links over here

Update III - Poppy Dinsey skewers me well with this link

We warned them at least a year ago that going for an $15bn valuation was silly, but they didn't listen

Now, cometh the downround and all it entails, as TechCrunch explains:

The cost of taking money at such a low valuation is higher than it appears. In addition to the direct dilution to stockholders from the new money, old investors at the $15 billion valuation may need to be made whole. Venture rounds traditionally include anti-dilution provisions that give investors more stock if the company raises new money at a lower valuation. Those anti-dilution provisions are heavily negotiated and can end up anywhere from full protection (which is very rare) to no protection at all (which is also very rare). It’s likely that there will be some form of additional dilution, possibly a lot of it, from the $375 million Facebook has raised at that valuation.

Never mind all the high power staff who've been tempted by options up the wazoo.... new paddles will be required. I think they'll be taking money at c $1.5bn valuation (see calcs here). Bets?

(Just to cheer them up some more - news that Facebook is losing its glow....but hey, we predicted that yonks ago too

Data from Comscore confirms that Twitter has mainstreamed (not that you needed to see the data to know it - the Great Sleb Rush and plethora of books now being hastily penned on Twitter for Dummies etc is enough data) - see the chart above. (hat tip Don Dodge)

More interesting data from the Comscore report is that:

- the bulk of Twitter users are not in the USA - that's rare, to get a service so global so fast
- The largest groups of users are not "The Yoof", people under 24 are under-represented on the service. It has an older demographic (25-54) than the other Social Nets.

This means that its users are (i) richer (Adman-drool), (ii) email-overloaded (a new channel to flow over the congested one) and (iii) more time pressured (which is, we hypothesize, one reason why it has taken off)

It will soon, therefore, be time for the Early Adopters to declare Twitter over, jumping the shark, etc etc, as they move on to the Next New Thing - but we know not what it is yet.....

Some weeks ago I remarked on a trend I saw at TED and also at SXSW - "not for profit" startups emerging in general, many in spaces where a few years ago you would have seen commercial entities. My hypothesis of the time was that:

- The standard "Freeconomic" based business models were shown to be bankrupt (ie they are de facto not for profits anyway)
- There is much less VC funding now, the State is the new moneybag
- There is less regulatory oversight of NGOs, allowing all sorts of profitable games to be played

A Wall Street Journal article today picks up on the trend:

While the lion’s share of the federal largesse will go to current Internet service providers or other established tech firms, venture investors are urging their portfolio companies that make everything from networking gear to mobile software to get a slice of it as well.

More than 2,000 requests for meetings have poured in to the Commerce Department as it crafts the final rules for disbursing the money — among them, many venture-backed startups. Venture financing has fallen off a cliff of late, with $5.4 billion raised in the fourth quarter of 2008 compared with $8.1 billion in the same period the prior year, according PricewaterhouseCoopers.

This is driving an interesting structural shift - my observation at TED was that too many of the NFP Startup CEO's looked like the same blazer-wearing MBA weasels of the last cycle, and cared little about the "ethical" bit that Not For Profits used to be all about. The WSJ seems to concur:

“Silicon Valley used to be libertarian, but we are all Keynesians now,” said Venky Ganesan, a managing director at venture fund Globespan Capital. “Everybody is trying to stick their snouts in the flow of pork.”

Yup - whereas the old game was VC cash for as-much-as-you-can eat free services, the new menu is all about currying pork....

Some startups and venture firms have hired lobbyists to monitor the action in Washington and get a leg up. “We wonder whether it will come down to currying favor with four senators or six congressmen,” said Matt Niehaus, a general partner at Battery Ventures.

While one would expect much of this, the issue a year or two down the line will be how to:

- Wean these companies off the pork belly teats
- Sort out the ruined reputation of the whole (under-regulated) NFP sector from the depradations of the greedy little sh*ts climbing in now
- Sort out the confusion in markets where state subsidies give unfair competitive advantages

If it were me, I'd be thinking of some form of fixed payback regime for state money and commercial style oversight of Not For Profits that are not truly "ethical" businesses and are in areas where commercial companies once roamed, or else it willl be a headache in 2 years time.

Australia has joined the group of countries that want to build broadband fast, as they announced today:

The Rudd Government today announced the establishment of a new company to build and operate a new super fast National Broadband Network.

This new super fast National Broadband Network, built in partnership with private sector, will be the single largest nation building infrastructure project in Australian history.

This new National Broadband Network will:

- Connect 90 percent of all Australian homes, schools and workplaces with broadband services with speeds up to 100 megabits per second - 100 times faster than those currently used by many households and businesses
- Connect all other premises in Australia with next generation wireless and satellite technologies that will be deliver broadband speeds of 12 megabits per second
- Directly support up to 25,000 local jobs every year, on average, over the 8 year life of the project

Under the Rudd Government’s new national broadband network every house, school and business in Australia will get access to affordable fast broadband.

Very sensible approach, and is a job creation scheme to boot.

Its sensible because all the evidence is that unless a country's broadband buildout is determined in some way by a national force, the high speed infrastructure just won't be built. The chart above, using data from the ITIF shows the countries with the highest mean broadband speeds now, and all the leaders have used government intervention in some form or other to drive the market. Competition just can't cut it as the sums are so large, and returns so uncertain, that it is resulting in piecemeal development. France volte-faced in 2005/6,oving from competition to control. Australia is next. In a way, Ofcom waving a green flag to BT is a tacit admission of this as well.

There is a rather interesting thing emerging - an increasing number of content owners are starting to tilt at the Google windmill where it hurts - in the copyright dept. As well as the very real lunges at YouTube and Streetview, 3 print organisations have taken aim in as many days:

Today, the Associated Press and the Wall Street Journal took pot shots, yesterday it was the Guardian. Some say they are acting in cahoots, some say not - but its interesting why they are acting now.

We hypothesize that there are 3 main reasons for this:

- Backs to the Wall - the print media (and others) are not going to lose by coming out swinging, and they most certainly will lose if they don't

- Back to Basics - the speculative capital funding some of their opponents is draining away, time to re-assert themselves as real world economics re-asserts itelf

- Back to Barack - a regime change to a less laissez faire and more liberal, literary chief - will this US administration really let the great titles collapse right now, with all the other woes on?

The new line is quite sharp, too - essentially arguing that if all the surplus is hoovered up by the aggregators, who is going to create the content required now that UGC is palpably failing, if not via rampant piracy.

We imagine the Google decline possibly working in 3 major phases:

1. Concerted attack on the (ab)use of other people's content and an attempt to force Google et al to pay recompense in an ongoing way.

2. Google's reduced margins means it cannot subsidise many of its other businesses, leaving them to be abandoned and thus freeing what has been an artificially free market for new players, at the same time as New Search attacks core Google markets.

3. Increasing resistance and desire for privacy safeguards, probably increasingly enshrined in law, limits ability to hit users with heavy duty behavioural targeting.

And so, What Will Google Do (to paraphrase the book that came out just before the End of The Dream)?

Firstly, clearly lobby like mad, but you just sense the tide has started to turn as reality bites - both in terms of digital economics and recessionary priorities. To anybody outside the digital Happy Valley, a system that allows the aggregators and downstream players to make out like bandits while content creators make a pittance is not sustainable - and right now governments are looking for sustainable industries

Secondly, PR like mad to paint a cuddly picture - but is any government really going to let the bulk of the national news media be run via a US megacorporation that has a history to date of playing fast and loose with privacy?

Thirdly, entrap - try to roll out as many services so users are woven into a web of usage so they can' easily disentangle themselves, an hope to increase the user synergies while reducing the costs. But one can hear the soft drums of anti-trust, of Netscape vs IE, calling.

By "the end of" I don't mean Google dies, just the hegemonic super-surplus erodes and that forces rational economics into the rest of the company.

You read it here first - you'll scoff now, but I'll point to it in 2 years time......

Following Facebook's knock off of Twitter, it was only a matter of time before Friendfeed followed suit. Here's the Blink! memo and the Broadstuff translation in glorious snark-o-vision:

We’ve been spending a lot of time thinking about how to improve FriendFeed. And we’ve been tinkering with those ideas at http://beta.friendfeed.com.

Translation: We still can't work out how those f*ckers at Twitter are doing so well with such a trivial app, but after Facebook volte-farced we new we had to follow suit

Today, we’re opening up that site for you to try it for yourself.

Translation: Have you guys out there got any ideas on what to do?.....

It’s a pretty significant change for us, and we wanted to tell you a little about what’s new, and also, give you some insight into our thinking behind what’s changed.

Translation:.....we really, really hope you have some ideas!

We didn’t start out with the goal of a radical redesign. Our goal was simple. Make it more intuitive, more consistent, and ideally, more elegant. Here are some things that you'll find in the new site:

- A consistent look for entries, no matter where they originated from, to help you focus on what your friends are sharing
- A new and improved share box that can now post entries to multiple feeds
- The ability to send and receive direct messages
- Filters so you don’t miss a post from a certain friend or an entry about a specific topic
- Keyboard shortcuts for the most common commands
- And, one of the most defining features of our redesign — and what we believe will underlie everything about FriendFeed from now on: real-time. There’s no longer a need for refreshing — every view in FriendFeed now updates in real-time.

Translation: We wanted to do some cool, complex, hard stuff but our VC's told us to get the frigging Real Time IM stuff in pronto cas thats what Facebook has!

Once you see how cool the real-time updating is, see it on your own feed at http://beta.friendfeed.com. (You might also want to check out our tour or read our beta FAQ.) And of course, we’re still adding new features and ironing out bugs, so please let us know your thoughts and comments in the FriendFeed Beta feed and report your bugs here.

And, as well as some ideas, can you debug it too

We want to get feedback from all of you before we flip the switch to make this redesign the primary FriendFeed interface. Our goal is to simplify the FriendFeed experience and put greater focus on the things that our users have found to be most valuable. We hope you’ll like it.

Translation: Our goal is to ramp the thing and sell to some dumb Corporation and get the bl**dy
VC's off our case. We pray you'll help sort it!

More evidence, if it was needed, that 3rd generation social nets are rediscovering what 1st generation ones knew - real time chat is the killer app.

Now, for those of you who feel this is all too snarky, we'd humbly agree, and we'd even agree that the Friendfeed guys are damned smart and we hope thay get it sorted - but hey, this is our schtick so why beat us with it? (And besides, with all the fanboi's on Techmeme a Court Jester may be a necessary function )

TechCrunch's Mike Arrington rips into the Gruaniad piece by Henry Porter, after Porter had made the sacrilegeous point that Google was not necessarily totally benign. Sez Techcrunch:

Either he refuses to understand, or just ignores, the fact that Google is the one being bullied here. The company is making a simple profit/loss decision and apparently concluded that it can’t make money on the deal being offered. To suggest that Google must accept the deal is to suggest that Google needs to subsidize the music industry simply because it is a profitable company.

It’s ridiculous and only makes sense when Porter moves on his his argument to talk about newspapers, which provide his livelihood (with no discussion of the direct conflict of interest). He then spends paragraphs trying to tie Google’s success with the failure of newspapers. He never really gets there, but does say that Google is “delinquent and sociopathic” near the end, which at least keeps things interesting.

Let’s all be clear here. What Porter and [Billy] Bragg want is a subsidy from Google. A sort of welfare tax on a profitable company so that they can continue to draw the paychecks they’ve become accustomed to.

(Billy Bragg was the musician who pointed out that the hBebo founders made all the money when they sold, whereas musicians input all the valuable content)

Anyway, what I wondered was if Mr Arrington would wax quite so lyrical if he realised that he, too, was paying a tax to Google, and I then wondered who was making more money out of TechCrunch - Mr A, or Google?.

A quick back-of-the blog calculation.

(i) Google's total revenue last year was c $21.8bn

(ii) Alexa says that TechCrunch's total % of traffic over the last 3 months was 0.109% of internet users.

If we assumed that the % of users who view TC globally is roughly similar to the % of TC watchers in the Googleverse of users (both being very large aggregators of users) that reached TC via a Google search, then that gives Google a (0.109% x $21.8bn) = c $23.5m revenue stream from TC

What is TC's actual revenue? It is reported as c $200,000 per month, which gives it a revenue of c $2.4m annually.

In other words, if all hits to TC are via Google, then Google is making 10x more money than TC is. Or, put it another way, if Google has only 10% of the traffic going to TC via its site, it makes the same amount of money.

Another way of looking at this is bottom up - Don Dodge once had a go at calculating the average revenue per search by dividing Google revenue by reported number of searches (see here) and came up with a figure of $0.19 per search.

That translates to a CPM of roughly $190 for Google, vs a CPM of probably c 1/10th that for TechCrunch.

Again, clearly not all pages to TC will go via Google, but if only 10% do they are making roughly the same money out of TC as Mr Arrington is.

(Update - just to explain following a few comments on-net and off, this post is in the nature of a thought experiment around what you have to believe for income parity. What struck me when I did it was just how much money Google potentially is making from heavily trafficked sites, assuming of course large site pageviews adhere to the overall mean)

That's quite a tax in fact. In the Olde Economy, when one does PR for a company, as Mr A seems wont to do for Google, they pay you. In the New Economy, it seems, you pay them......(or maybe Google do pay TC for PR, it's Mr A's way of clawing the Googletax back )

I wonder if we may see Mr Arrington and Mr Bragg on the same stage someday soon

Spoof on Twitter and the Attention Deficit disordered via the new "nanoblogging service" Flutter. The more I look at it though, the less I think its a joke and it has real applications, especially in m2m comms. Not so sure about Shttr though.....

(Hat tip Neville Hobson for this video from Slate)