The big news this week is Google’s purchase of YouTube for $1.65 billion dollars. I have spoken to many radio people who are stunned by this news, but these multiples aren’t crazy in the Internet world. After all, YouTube attracts millions of visitors a week to its free video site. As we know, most of these videos are home made – CGM turbo-charged. The other "holy cow" aspect of the story is that YouTube isn’t even two years old, and already has more asset value than many other mature media businesses.
So, what have we learned from the YouTube story?
1. Video streaming is the real deal, and Google knows it. While Google started their own video streaming service, YouTube dominates nearly half of this space. Google probably feels like it got a great deal.
2. The Internet is exploding, and this isn’t that "bubble" from several years ago. As Gordon Borrell pointed out at Summit 11, Internet revenue will pass radio revenue in the not-so-distant future. And as Jason Calacanis told us an hour later, "Advertisers are so looking for something new."
3. This is an exciting time for American business, because it is possible to create something from scratch, and turn it into a winner – quickly. As Matt Ragas told us at Summit 8 in 2003, "New cult brands are being created every day." Ironically, the example he used was Google.
Now, three years later, it’s YouTube, and Google was wise enough to suck them up right now.
4. Radio has the assets to compete in this space. As Calacanis pointed out, radio has the sales force, the reach, and the production capabilities to create a monster in 12-18 months. And it’s not just a strong revenue play, because as he also noted, "The radio business has such terrible multiples in terms of an asset…Internet businesses get a much higher multiple than radio…and for that reason alone, you should (create Internet revenue models and content)."
And isn’t that last point the real bottom line? The asset value of radio stations is sinking, while Internet is doing nothing but expanding. While Station A is trying to pry business away from Station B, the radio advertising revenue pie is shrinking. And we’re completely missing the Internet opportunity because of denial and our refusal to consider change.
Why not re-evaluate the business model as Borrell and Calacanis suggested? Maybe they didn’t get it all right, but spending two hours streaming their presentations at www.ik9.5f7.myftpupload.com/summit could be the best time you’ve spent this year. It may be the best free advice radio can get.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,300 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.
Fred was inducted into the Radio Hall of Fame in 2018.
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