Fred Wilson calls for everyone to stop hating YouTube.

I’m certainly not a YouTube hater- it won my Web 2.0 Wars series.  And I agree with Fred that the neatest stuff on YouTube is not the “pirated” stuff that maybe shouldn’t be there.  It’s the user-created stuff.

But, but, but…

I think the absurd valuations that all of these bubble blowers are trying to associate with YouTube depends in large part on its ability to serve a lot of “pirated” content.

And…

I think we have to make a distinction between people who dislike YouTube in and of itself and people, like me, who only dislike the wildly overinflated valuations that the circus barkers yell at us from inside the greater-fool tent.

YouTube would be a great site, community and service if it didn’t have one clip of pirated content.

But it does.  The ironic thing is that most of the content producers weren’t really complaining.

Until some dumbass started squawking about how many billions of dollars YouTube is worth.

Why not just sit back and let YouTube try to come up with some revenue streams and then ask them how much money they make?

The answer, of course, is impatience, greed and the complete lack of scale.

Fred Wilson has a post today with some more thoughts about YouTube’s revenue potential. Recall that he previously posted that YouTube could generate as much as $150M in annual net revenue. I had some tongue in cheek comments to his ensuing conversation with Jason Calacanis- all of which were ignored since no one could respond with a straight face to my assertion that people aren’t really fired up about the ability to spend their free time tagging ads.

Fred’s latest post begins with a back and fill that would make Kinky Friedman proud: “Most people got the fact that I was trying to stimulate a conversation more than project revenues for a specific company,” and then goes on to talk more about the revenue issue.

First, about that 10 second ad at the beginning of each video clip. Fred seems to agree now that such an ad would reduce views, but argues that the degree would depend on the video content. SNL clips would be less affected. Home videos would be more affected. I think that’s right. Getting that content would be the hurdle. You could try to turn YouTube into a de facto TV highlight station- at least until the networks sue it into the stone age (or, as Fred points out later in the post, demand the right to embed their own pre-clip ads). Regardless, ads at the beginning of clips will reduce the views, as well as the good karma surrounding YouTube. Not to mention the fact that the networks are going to want to draw people to their web sites, not YouTube, to see their content.

Fred seems to have abandoned, at least for the moment, the position that the ability to tag ads would mitigate the reduced views. Fred won’t engage me on any of this stuff, so I have to deduce his overall philosophy about Web 2.0, ads, etc. It seems to me that he begins with a basic assumption that people will accept ads in exchange for certain content (YouTube, HD radio, etc.). Maybe, but I believe the threshold for that content is a lot higher than Fred thinks. While only anecdotal evidence, I have heard a lot of complaints lately about the increasing number of ads that roll before movies at the theater.

What is less anecdotal is that people will clearly go out of their way to avoid ads presented by TV networks, who have more experience than anyone else in producing what is supposed to be interesting content. Showtime, HBO, XM, TIVO and many other businesses are based, at least in large part, on the desire for an ad-free experience. YouTube would be better off adding ads solely as a way to force people to pay for premium memberships just to avoid those ads. In sum, I am convinced that the public’s aversion to ads is much greater than Fred admits.

Next, Fred says that the whole purpose of a service like YouTube is to blur the lines between content and advertising. He says content and advertising should be one and the same. Look, people have been trying to blur that distinction for tens of years. The beers make funny commercials that people will watch- once or twice. After that, it’s back to this fast forward button. Do you really think ads on YouTube are going to fool people into believing they’re something they’re not? Of course not. And unless you do a new ad for every clip, people are going to be asked to sit through the same ads over and over.

After thinking about it some and considering the comments of the worthies, Fred says maybe post-clip ads are the way to go. I think exactly nobody will watch them, but I like that idea better because it means the advertisers are the ones betting on the post-clip ads being a barrel of monkeys- and not just saying that while forcing up-front ads on people who just want to watch a 30 second clip of a cat in a jar. I suspect, however, that the people who buy ads would value post-clip ads a whole lot less than pre-clip ones.

There’s a lot of discussion about having paid video links and organic ones at the end of each clip, much like the ad configuration Google has bet all of its shareholders’ money on. I agree that Google’s sponsored links was a good idea- and I will admit that on those instances in which I am looking for something I need to buy, I have followed them. But no matter how hard you try to feather up the dog to look like a chicken, people will always know what’s intended to entertain them and what’s intended to separate them from their money. Another distinction is that when people search via Google, they are often looking for something they need- be it a product or some information. So they are pre-conditioned to buy. When looking at YouTube, people are generally looking for entertainment- free, immediate entertainment.

Fred’s basic assumption is set forth in the following sentence, describing a theoretical Nike ad: “If your video is great and the audience loves it, passes it around, etc….” That’s just it- an ad can only be so great. Sure, Terry Tate is sort of funny. But for every Terry Tate there are hundreds of boring ads no one cares about. One Terry Tate cannot turn the ad industry into a thousand Terry Gilliams.

But I have an even bigger question.

Why is it so important that YouTube make $150M a year? Why can’t it be like the corner market, serving its customers well and making a nice living along the way? My biggest problem with the VC/Web 2.0 combination is that scale is completely out of whack. Hitting singles and doubles doesn’t seem to cut it anymore. Everyone is wildly swinging for the fences.

And mostly missing the ball- and the point.

Tags: youtube

So what’s next, the U.S. Government putting ads on dollar bills? Maybe hospitals could add interactive ads to x-rays and sonograms. Consumer reports dumping its virus-writing magazine and starting a social networking site?

Jeff Chester reports that PBS has decided to run online ads this fall at PBS.org and PBSkids,org.

Why? You know why: “to benefit from the ‘explosive growth and rising demand’ of interactive advertising.” Oh, and because it is “a response to the demand of the market.” Right.

Jeff sums up this mistake nicely:

PBS should not be seeking commercial opportunities in the broadband market. Instead, it should be pioneering new forms of non-commercial content readily available throughout our ubiquitous digital system. PBS must recognize by now that online and TV (as well as mobile) is merging. The distinction about whether content is delivered via any platform no longer matters. But what does matter is that PBS, and its stations, don’t attempt to replicate what commercial media companies are doing online and with mobile networks. It will be a U.S. media universe saturated with advertising.

The reason that most people support PBS is because it offers programming that they cannot generally get elsewhere. Granted, the hundreds of channels available via cable and satellite have blurred the distinction a little. And as we all know, PBS has nosed up to, but not yet crossed, the line by adding sponsorship messages at the beginning and end of some shows. But adopting the mercenary and short sighted approach of the mainstream media (as well as all of Web 2.0) is inconsistent with the history and mission of PBS. If any of this online mistake creeps onto the television, I suspect many of PBS’s supporters will cry foul when they get the letters and phone calls about donating to the cause.

You can’t act like Fox and expect to be treated like the neighborhood co-op.

What disappoints me the most is that I would have expected the brains behind PBS to see through the advertising hype and avoid the temptation to make what is clearly a momentum play.

I wonder what Louis Rukeyser would say about this investment?

Tags: pbs, advertising

You know I just can’t see you now
In my new world crystal ball
You know I just can’t free you now
That’s not my job at all
– Van Morrison

Before we get started, please recall my position statement from the other day: “I’m not so much interested in having the blogosphere operate differently as I am in calling bullshit when people try to say it operates differently than it actually does.”

As the dust settles over our most recent gatekeeper debate, with a lot of good and bad points having been made by bloggers on both ends of blogger’s hill, Jeff Jarvis decides to add his two cents.

He talks a little about Metcalfe’s Law, which holds that the value of a communications network is proportional to the square of the number of users of the system (in other words, the value grows geometrically with the number of users). I’m not very interested in the topic in its natural state, but Jeff makes a logical connection between Metcalfe’s Law, Moore’s Law and the longtail blogosphere. He argues that the true value of a network lies not a the center, but at the edge. Although I think he glosses over part of the trip, I can see a logical connection between these concepts- and I can see a correlation between them and the evolution of the internet and the little corner of it we call the blogosphere.

Next he talks about open networks- and the benefits and burdens of perhaps being too open (that is called foreshadowing, for you literary types). As he says, email may be too open, because it permits spam. More interestingly, he makes the point about MySpace possibly evolving into another too open network: “when everyone is your friend, you have no friends.” I don’t know if I completely agree with that, but the logic is reasonable.

All of this leads Jeff to conclude, in a borrowed cliche, that “small is the new big.” Why? Because of the value of niches and the oft-ignored x-factor in valuing a network- affinity. Songs are written around hooks and posts are sometimes written around the quotable excerpt, but at a minimum I agree that affinity is a prime mover in both social networks and the blogosphere. Just to be sure we’re all on the same page, the American Heritage Dictionary defines affinity as “a natural attraction, liking, or feeling of kinship.”

This leads Jeff to propose a new formula for valuing networks: Network value = the sum of the value each member of the network places in it. He then admits, thankfully, that this is not calculable, since you can’t easily value love. So where does that lead us?

To a new piece of cake of course. This cake made of affinity and control.

Jeff then turns to the gatekeeper business. Somehow all of that math leads Jeff to make two points. One that is perfectly logical, followed by a conclusion that I find oddly clever and completely hilarious in its transparency.

Logical: “One should value a network as the sum of its networks.”

Transparent: “This is why I continue to think it is absurd and wrongheaded to analyze the blogosphere on its supposed A-list.”

What Jeff is saying is that if the people he and his pals like and feel a kinship towards are having a million units of fun while the people they politely (in Jeff’s case at least) ignore have ten units of fun, the value of the blogosphere is a million and ten. That’s like saying there’s no world hunger because many Americans have full pantries.

And of course that completely begs the very important question of what to do when none of the people you have affinity for ever gets a word in either. As I said the other day, the blogosphere is a small room at the end of the internet. It’s not like we can go out and create some alternate blogosphere where Klingons are good and Richard Querin is Steve Gillmor.

For those who want to hear it in non-mathematical terms, here’s something Jeff says that makes the same point another way:

This is about the value of being the right size: I value the Continental President’s Club because everyone in the airport does not belong; if everyone did, its value would fall to nil. This isn’t about snottiness. It is about control.

Thank goodness all the poor people have to sit out there at the gate. The horror. I don’t think he meant it that way, and I am not trying to imply any improper intent. But (and this is a big but) control over who drinks at the bar next to you and control over who gets to participate in the blogosphere conversations is the very same thing.

And about that niches theory…

As as far as niches go- the entire blogosphere is a niche. The tech blogosphere, where most of us hang out, would be a sub niche. A niche inside a sub-niche is not a niche. It’s a clique. That’s a quotable excerpt that will almost certainly not make its way up the mountain.

One more point of logic, if I may…

Jeff goes on to create a law, name it after himself (That’s cool with me- I agree that everyone needs one- I have a rule and that’s almost as good), and conclude:

The Law of Open Networks: The more open a network is, the more control there is at the edges, the more the edges value the network, the more the network is worth.

Which I think means that the more people who have access to the blogosphere, the more control will flow down blogger’s hill, which will make the disenfranchised bloggers happier, which will be good for the blogosphere as a whole. There is certainly mathematical truth to the first two parts of that statement and it sounds like the words of a valiant, if idealistic, social reformer. But it is also self-evident that merely being included in a population, be it bloggers or citizens, does not end the struggle for equal opportunity. Sure, power shifts naturally as water flows naturally. But there’s more to it than that. The efforts of those upstream, be they the ruling class or the dam builders, can impair and corrupt the process. To say that the natural effects of inclusion will solve the problem without further effort is to abandon a battle half won.

And a battle half won is a battle lost, because we all know that a tie goes to the incumbent.

I also have to admit that I found it interesting that with all the talk around the blogosphere this week about this issue, Jeff quoted only the following people: Nick Carr (but only to call him absurd and wrongheaded), Doc Searls (everyone knows I like Doc), himself many times (no problem, I do that too), Tom Evslin, Fred Wilson, and Hugh MacLeod (via Hugh’s visual summation).

Other than Nick, who while somewhat of an outcast, has a huge readership, not one single dissenting voice. Not one person who isn’t sitting next to him in the blogosphere equivalent of the Continental President’s Club.

Lots of people made lots of good points on both sides of this debate this week. To dismiss all of them as absurd and wrongheaded and to quote so many others who share his general viewpoint on the issue seems like a convenient shortcut.

It seems a little, I don’t know, like singing to the choir.

Tags: blogs, blogging, gatekeepers