There's a lot of talk about the billions of dollars that are being discussed and passed around regarding the sales of Youtube, MySpace, Facebook, etc. Mark Cuban has stated only a moron would pay that much for Youtube. I'm sure if we could rewind time, many folks would be wondering why Mr. Cuban made as much money as he did back in the Dot Com bust. I've heard him called ‘the accidental millionaire' and I think it might fit. I've read quite a bit of his blog and it's a lot like reading a 12 year old girl's MySpace. He said, she said, blah, blah, blah.
The Dot Com boom and bust was a necessary failure that elevated technology and the web to it's own economy. Much of the money wasted was simply in search for a good business model. Though it's still not sorted out, the business model is beginning to take shape.
I've been a huge critic of measuring ‘eyeballs' but it seems that's what this new web economy is all about. Youtube isn't being purchased for the content or the technology – it's being appraised at that high a level because of the number of captivated audience members it has. If a billion dollars is too much for Youtube, why would it be okay for Ford to sell for a few billion? Ford isn't making a profit either… but everyone knows it's worth it. Unfortunately, if Youtube is purchased by a major Internet power… it adds a lot of ‘eyeballs' to their brand.
That's called Market Share.
And we're beginning to see the beginning of Market Share taking shape on the web. Google, Yahoo! and Microsoft are all looking for and buying Market Share. As a result, any site with a very large audience is a target much like any TV or Radio Station is a target when they have a large audience. Though the revenue isn't currently there… the more audience you can buy today will pay off in advertising revenue tomorrow. It's an old model that does work with other media models – newspapers are a great example. More money is made off of a subscriber in ad revenue than in subscriber revenue.
I'm still not so sure the business model of ‘buying eyeballs' is a good one for the Internet industry, though. I suppose we'll have to wait and see.