Only a Moron Wouldn’t Listen to Mark Cuban

29 Sep ’06

Much agitation in the ‘sphere today over everyone’s favourite topic for pointless debate, YouTube valuation. What is this, Web 2.0 whack-a-mole? We spend part of the week scoffing at the inanity of analysts tripping over each other to out-estimate each other on MySpace valuation, and before the weekend rolls in the topic has surfaced in some other corner of the ‘sphere, where everyone seems to be trying to outdo each other with assertions of YouTube’s intrinsic value.

This particular episode of indignation theatre concerns Mark Cuban’s admittedly curmudgeonly assertion that given concerns about the ownership of so much of its popular content, “only a moron would buy YouTube”. The ‘sphere has erupted in indignation, with much of the lather making the point that YouTube, as a disruptor with an audience, is worth something. My friend, the ordinarily sensible Mathew Ingram (having had the title “ordinarily sensible” bestowed on me by Stowe Boyd, I now pass it along to Mathew), is among Cuban’s critics, though he manages to keep his criticism muted, with a post titled “Only a Moron Listens to Mark Cuban”. Wha??

To the mob, I would say, well, yes, it’s worth something – and Cuban, not being a moron, surely understands that it’s worth something. But to the extent he was doing anything other than poking a stick at stuffed shirts with a lot less money than he has, he was surely making the obvious point that buying YouTube while it’s burdened by this potential liability would be reckless – simply because it would be so difficult to know what the “something” is, and so easy to wildly overpay.

Surprisingly, in much of the kerfuffle over Cuban’s remarks there is little said in response to his other observations – observations that I thought were far more interesting, and to the fact that he’s hardly an ubiased observer – he’s competing for the advertising dollars that are said to support a high YouTube valuation. His other observations noted in the CNet piece that kicked this off:

  • The reach of YouTube is limited, particularly when it comes to user-generated videos. “User-generated content is not going away,” he said. “But do you want your advertising dollars spent on a video of Aunt Jenny watching her niece tap dance?”
  • “Somebody puts up something really good and you get, what, 60,000 viewers?”
  • Cuban cautioned advertisers against investing heavily in so-called viral campaigns that are spread by users beyond their initial point of distribution on YouTube or other video-sharing sites. “What makes viral so special is it’s so hard to do. It’s so hard to plan. It’s hard to stand out,” he said, describing 99 percent of money advertisers spend on viral campaigns as “wasted.”

My sense is that Cuban’s on to something – relatively little of the content will earn anything in ad revenue, and what does will earn relatively little. On this Cuban obviously would flatly disagree with Fred Wilson, though, who recently guesstimated about half a billion in annual revenue.

Finally, the CNet piece also contained this interesting observation:

YouTube, which has nearly one-third of the U.S. Web video audience, three times that of Google, or twice that of News Corp.’s MySpace, has been working on signing licensing deals with music companies and TV networks to ensure they are paid when users view their content.

which may be true, but nonetheless glides right past the discussion earlier this week on the traffic that the top video sites are actually seeing.

Update: Valleywag on the content we’ll lose when YouTube sells out.

Update: Fred Wilson, Jason Calacanis, Kent Newsome and Bob Lefsetz chime in. I’m obviously with Jason and Kent on this – and I still don’t see what the fuss is about. Though after reading Fred and Bob, I am feeling a little misty, and think I need to spend a little time alone. Maybe I’ll go write some poetry, or sing Kumbayah. :)

Previous post:

Next post: