Gold Rush Coming!

If you have any internet grey hair (you have been around technology for at least ten years) and been watching all the to do about the Web 2.0 (YouTube, et.al.) fight with the media rights owners (Viacom, etc.) over content rights violations, you probably have an "I have seen this all before" attitude.

And you have.

And if you have been around for less than 10 years, all you need to do is wander over to your local arcade and play a good old fashioned game of "Wack-a-Mole" (I have not seen a good emulation online, or I would point you there) to get the picture of what is going on.

The big rights players are hording their good content away from the internet because they don't know how to monetize (they have the wrong/same people in place managing their digital ventures). The Web 2.0 guys are creating markets of meaningful size, but have trouble with customer loyalty and getting rights content type CPM from advertisers, so they need a strategy to get that content in. They have investors demanding returns (most took way too many $ and find themselves hoping for valuations that will never come- that's the subject of another blog to come).

But when the two groups speak, it is like a 1980s style Reagan/Breshnev discussion or worse. Tech guys don't speak media language and vice versa. The Ad guys want it resolved, but they are fearful of the rights relationships that revolve around TV so they stay away, hoping the situation resolves itself.

But it doesn't, and it all heads to Court. In this Jon Stewart style evolving comedy of miscues and errors (I thought you might like the comparison since the Viacom-YouTube debate is mostly about Daily Show content), this is the funniest part. Once in Court, the idiots are in control of a situation that goes from a Wack-a Mole game to something more like trying to hold that whippet gas in back in college (if you never tried, I am not advising you do...perhaps a different metaphor- herding cats!). By the time all the non-tech lawyers and judges get around to considering the issues, the ecosystem has moved on, the issues are no longer relevant, some people are out of business and the Mole has appeared from a new hole!

Think I'm overstating again? Look at Netscape v. Microsoft (those of you under 10 in internet age may not remember Netscape, but it is on Wiki, so go there)...the issues that went to trial were a joke. Microsoft knew that would be the case and they laughed and danced their way around for a decade, while their cash horde grew to $50B!

So, if the Moles are going to keep getting wacked, why keep trying? Because the $ coming from Ads is growing at an amazing pace (search $ paid out by Adsense are up 70% year over year on a per click basis and keyword prices are up 3-4x) and the expense of maintaining a legit internet publishing business is moving toward $0 at a pace faster than Moore's Law!

Assuming the YouTube syndication strategy fails (seems likely at this point), where does the mole pop up next?

There is a land grab coming of unprecedented proportions with web publishers churning out thousands of sites with new brands, Web2.0 integration and editorial solutions that will not be so easily swatted away. The internet will support 100s of ESPN type businesses of all sizes and all profitable, focused on any vertical you can think of, including camping out in the backyards of the major rights holders with winning legal strategies.

So, hitch up your wagon and join the gold rush. There has never been an easier, bigger opportunity. But where and how to stake the claim?

I'm already in in many places, so soon I'll tell you about that play, but the critical component of this wave will be staying power- not venture capital. Venture Capital leverages staying in the wrong claim with the wrong team. This land grab requires flexibility... so VC capital is silly to take.

Staying in the game because you love it and know how to operate to a profit is where the wins are. Do it once, then do it 500 times. Then you have a meaningful business. And you own it ALL!

Drop me a note if you want to know more.

Why do the major rights holders miss every dotcom opportunity?

NBA Commissioner David Stern Testifies before Congress about steroids (Getty Images)

You see it over and over- a new tech service comes to market with a great idea on distributing content to consumers (Yahoo!, Real, Napster, Google, Tivo, Bit Torrent, YouTube...). The content rights holders hold back from the service attempting to impose their traditional market metrics (big cash up front) on the new service. Consumers hijack the content anyway and put it into the new service. The rights holders scream and hire lawyers. If the service acquiesces and does business the way the rights guys want (RealOne, Napster, Bit Torrent(tbd)...) the service dies, the rights guys win the near term battle.

With the smarter players, the rights issues are somewhat subtle and often involve the creation of a "piggyback" service unique to digital media (Yahoo!, Google, AOL, iTunes, Tivo). On unfamiliar turf, the rights holders shake their heads and put their hands out, begging for a morsel! The tech services laugh, having created a service that people love, with or without the rights holder content! They send over a few bucks, but, their lifeline in no way dependent on the rights holders, they forge ahead with public market strategies that realize real value that could easily have belonged in part to the rights guys. What they fail to do is analyze the situation and act in their own best long term interst- the success of new channels and the realization of shared value!

Think I'm crazy? Consider this- who made out the best in the Google IPO (other than the VCs and founders)? If you are thinking Yahoo! you are right- they got more than $1B in value by asserting their "rights" in a way that did not threaten the life of Google, just made clear that where YHOO IP created value, they should get to share in that value! This is a concept that is lost on the NY/LA media guys, all of whom think their universe wll be king, failing to understand the need to PARTICIPATE in the Webocracy to win big. Yahoo! got it because they have smart guys on their Board!

Want to see a disaster in failed web strategies? Look at the web sites of any of the major rights guys (NFL.com, NBA.com, all the TV shows and movies, the record guys (though they are more advanced now out of necessity), MLB.com and so on). Every one of them has the same strategy they launched with ten years ago. In every case, they have failed to realize the potential upside that their content naturally brings because they think the computer is a TV and they want to be the portal for their own customers! The essence of the failure is that they lock down their content on their sites, force consumers to go there to get the content and ignore consumers who don't get there! In short, they are all trying to be Portals, but failing because they ARE NOT INTEGRATED WITH THE WEB!

What should they be doing? It is very simple- just go look at the success stories on the web and EMULATE! Every rights web site should be a syndication portal first and foremost. Give consumers and webmasters all the content they can possibly want- especially stats, images and short clips- to post anywhere they want any how they want. The goal of the syndication is eyeballs first, ad revenue second, right fees much later on, after the channels have been created (pull out the old playbook and follow the ESPN play!). After syndication is firmly in place, with broad distribution and availability of content, then you can return the focus to building nice proprietary web sites, the singular purpose strategy employed all these years!

When you have a treasure trove of content, you can analyze how to use it to meet all of your goals. The issue is understanding what those goals should be and being able to act in your own interest, something that the old guys in new media fail at every time because they are so locked into their application of TV strategies to the internet.

Is it YouTube or Flash? What's next?

For the last few weeks, everyone has been talking about YouTube and its acquisition by Google for a cool $1.65B. The most common question from industry outsiders is "how could YouTube be worth it". That's easy and I'll address that first. The more interesting question in my view is whether the thing that made users go to YouTube in the first place was the content and Web 2.0 presentation or Adobe's Flash software that made it so easy on users AND what the answer to that question might mean for the industry.

So, first the valuation. Just do the math- with the metadata YouTube collects the value of Google Ads on 1,ooo YouTube pages is about $2.50. If they show 100M videos a day as reported, Google can move in right away for $250K/day; over a year that's close to $100M with no additional traffic direction or ad optimization. Since Google can absorb the entire operation with no additional impact on their budgets, all revenue is accretive. At a conservative 15:1 earnings multiple, you get to $1.5B pretty easily; take it to internet type 50:1 multiples and you get a picture of the upside for Google.

Now the real question: why is YouTube a killer service? Is it the Web 2.0 video implementaion (and enabling the theft of rights holder content) or implementing Adobe software so effectively that users get the holy grail- seamless video!

If you know me, you know I like to take the contrarian viewpoint! While Web 2.0 is cool and the social elements are lots of fun, my view is that Web 2.0 and the over hyped rights issues are a sideshow. It's this simple: people love the presentation; YouTube delivered on a long sought after premise- video displayed in the browser with no additional application launch! YouTube's value to users is in the implementation of Flash! The amazing thing is that they own nothing! Not the content, not the technology! They are a pure portal play....

So, what's next! I say watch the real winner here- Adobe. With the brilliant acquisition of Macromedia and its stellar Flash browser plugin, they are positioned with the best implemenation of the "give it all away free and get 'em addicted" strategy since your local dope dealer, or Intel in the late 1980's. Oh, and isn't it funny how Intel's long time SVP of Advertising and Marketing, Anne Lewnes, slipped quietly in the side door at Adobe (now "CMO")...what better way to capitalize on a strategy developed at Intel than to hire the person who implemented most of the killer marketing strategies based on the dope dealer analogy!

And here's the long shot- Google will make a play for Adobe or run the risk of losing their position as the #1 alternative to MS on the consumer desktop. And this time it will be a $50B+ play that will stun us all...more to come.