By Joe Banks
First it was Rupert Murdoch’s News Corporation buying social networking site MySpace, and now it’s search behemoth Google stumping up £880m for video sharing phenomenon YouTube. The message is clear – big business is taking Web 2.0 very seriously indeed.
In fact, some commentators have opined that these companies are jumping on the ‘new’ new media bandwagon with unseemly haste, pointing out that neither MySpace or YouTube are making a profit, and that there’s no obvious business model to generate revenues in the future.
So, is this just the latest internet bubble, destined to burst messily in a couple of years’ time with red faces on one side and jeers of ‘we told you so’ on the other?
Somehow, I don’t think so. There may be no defined business model yet (though the growing power of online advertising shouldn’t be underestimated here), but traditional media companies have finally worked out which way the wind’s blowing – hours before the deal with Google was signed, Universal Music, Sony BMG and CBS all agreed to officially license content to YouTube, whereas only months before they were threatening legal action for copyright infringement.
Contrast this with what happened a few years ago to Napster (neutered to the point of irrelevance), and you can see that the online world – and crucially the way it is viewed by ‘old media’ – has changed significantly. Whether they like it or not, old media has had the good sense not to kill Web 2.0 at birth, having recognised that sites such as YouTube are providing something popular that they aren’t. Google has certainly recognised this, which must have been a particularly bitter pill for them to swallow when you consider the failure of Google’s own video search service.
The point is that, while Web 2.0 standard bearers such as YouTube and MySpace might be the ‘new thing’, they’re clearly no longer operating in an immature market. The original dot com crash happened because it was an imaginary economy talked up by the nascent online industry itself, rather than being driven by users and consumers. In other words, the demand was for the most part illusory. This is not the case with Web 2.0 – just look how quickly these sites have gone overground, with numerous articles about them already in the tabloids, broadsheets and Sunday supplements.
There might have been sharp intakes of breath in some quarters when they saw the price that Google had paid for YouTube – but with traditional media being forced to embrace new delivery mechanisms as viewing/listening habits continue to fragment, this might still turn out to be a comparative snip.
(As a footnote to this story, here’s another perspective on the valuation of Web 2.0 companies…)
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