I was reading Steve Ballmer scratching his head in BusinessWeek where he was wondering about the valuations that are getting paid out for companies like Skype and YouTube.
Good to hear that Ballmer’s leadership on the social software industry has remained consistent since he turned down Flickr when that sold to Yahoo for $30 million. I, and others, told Microsoft’s execs to start buying everything that moved in the social software space cause we knew that valuations were gonna be much more expensive later on. The executive leadership at Microsoft didn’t believe us. Still doesn’t.
Don’t miss Ballmer’s question here: “[You’ve got to ask] could Google do whatever it is they’re hoping to buy without paying $1.6 billion?” That’s Microsoft’s engineering culture coming through. Clearly Ballmer believes he can build YouTube for less.
The thing is, YouTube is two SEPARATE things: 1) the technology. 2) the community/brand.
Doing the technology is fairly straightforward. I’m sure that could be built for $100 million or less. Probably far less if they really are smart about how they go about it.
But duplicate the community and brand (er, those eyeballs, as Ballmer calls them) is far far far more difficult. The fact that he insists on calling me a set of eyeballs tells me Ballmer doesn’t understand the trend here. Why we love YouTube isn’t cause we can watch other people’s videos. It’s cause we can upload our own lame videos!!!
Now, will Microsoft be able to spend less than $1.6 billion and build their own YouTube? Maybe. Why? Cause Microsoft will have to spend hundreds of millions (probably more than a billion) in advertising just to attempt to appear “cool” and get people to try its video service.
Even then, as AT&T has demonstrated, spending a billion on marketing is no assurance you’ll come out the other end with a good audience and with people thinking you’re cool.
Google realized it couldn’t make its own video service look as cool as YouTube. Too bad Ballmer still hasn’t figured out he can’t buy his way into cool without buying some things that are cool.
Back to Facebook. Is it worth as much as YouTube? I don’t think so because only college students associate with that brand. With YouTube everyone from 80-year-old friends to my son were using it and talking about it. Facebook is struggling to make its brand interesting to non college students. So far it has failed, which is why I don’t think it’s worth as much as YouTube.