The Article That Popped the Online Video Zit

pimple.jpgKevin Maney of the USAToday wrote the article that might pop the Internet online video zit. And it needs to be popped. I can’t stop looking at it. I just want to take my thumbs together and pop that pulsating red and white pimple. Because only when it’s gone can we move to the interesting era.

This morning I decided to make a video in which I would dub myself YouTube’s “emperer is wearing no clothes” guy. Haven’t finished it yet, but the point of it will be that this space (YouTube especially) is overvalued. A BILLION for YouTube? That’s probably one-million-times earnings. Not a good ratio. I see about two or three viable online videos. The rest will vanish.

So here’s this article, which is a great read if you’re interested in the business behind online videos… it’s called “Mania Strikes Web Again: Video Madness Takes Off.” It’s the best piece of journalism I’ve read on this space (and believe me I’ve read my share in the past 6 months). We’ll soon see some me-too articles like it, and this could lead to the online video bubble burst. Eventually my sister (a freelancer at ABC) will realize this is newsworthy and she’ll pitch a story. Right now she’s like “whatever… YouTube is sooooo popular.” And then while the next era of online video is quietly building, we’ll continue to see 6 months of news stories that say what Kevin did today. At least the business articles. The entertainment stories will still be about how some kid got famous on the Internet.

Up until now the mass media has been in some sort of weird hypnotic trance. It’s all about the online videos, and nothing about the revenue or sustainability. But Maney comes in with this incredibly sober and well-documented article. Here are the highlights:

  • Web video sites are proliferating like bunnies that broke into a vat of Viagra.
  • Tech blogger Om Malik calls it “the madness.”
  • In just the past year or so, Internet video sites have exploded from barely any to more than 240.
  • New ones appear every week.
  • Venture capital (VC) firms pumped $156 million into online video in the first half of 2006, according to Dow Jones VentureOne. That’s up from basically nothing a couple of years ago.
  • VC firms have raised $18 billion for their funds this year, up 41% from 2005, according to the National Venture Capital Association.

Because fund rules state that the money has to be invested, the VCs are kind of like a guy who has been drinking all night and has a bladder the size of Lake Huron. They’ll go the first place that looks promising.

kevin_maney.jpgInterestingly, the following paragraph got yanked from the story that’s live now: “Analysts keep fanning the fire with outrageous predictions. PricewaterhouseCoopers released a report saying that by 2010, online video will be a $1.8 trillion industry. That’s about what the USA now spends on health care in a year. If PricewaterhouseCoopers is right, then if YouTube continues to control 60% of the market, by 2010 it will be a $1.1 trillion company.” A message on USAToday article PriceWaterhouseCoopers’ Entertainment and Media Outlook predicts that the entire entertainment and media industry will be $1.8 trillion by 2010. An earlier version of the story misstated PWC’s outlook.”

I prefer to accept the first version because I kinda like the idea of PWC totally overstating the online video market. Anyway, aren’t they IBM now? Kevin- thanks for correcting it, but I’m going choosing to remember the first one. Anybody ever go back and look at the Forrester and Jupiter 2000-2005 expectations on doc-com revenue that were written in 1999? Now THAT’s madness.

Author: Nalts

Hi. I'm Nalts.

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