The case for eBay as the natural YouTube buyer

Speculation currently abounds as to who might meet YouTube's proposed $1 billion price tag - Russell Shaw at ZDnet has a list of six, from Adobe (unlikely) to Yahoo! (currently looking like the odds-on favourite). Scott Karp expresses a passing fondness for News Corp as a buyer; others propose the best fit is with Apple and its iTunes/video iPod combo, or point out that a video content producer/distributor would kill YouTube (a notion I'm broadly in agreement with).

Personally, I think it's going to make most sense for eBay.

At the moment, YouTube is a pretty dumb model of video aggregation - people make videos, upload those videos, other people watch them. All well and good. To get to the next stage, to add some value to this basic process of user-created video, YouTube needs to be putting talented directors in touch with talented writers and talented cameramen and great actors - it needs to be positioning itself to create the next generation of genuinely great programmes and films, not just amateur clips of the "funniest home video" standard. Look at what has been achieved by as small a network as Channel 101 in LA by putting together a monthly festival with web distribution - quoth Gareth Stack at Hummingbird Mentality:

"101 is far from your everyday nascent net-tv channel...the site is primarily the web distribution element of a monthly LA film festival, where participants primarily from LA (though the contest is open to anyone), of greatly varying talent and experience, submit brief (5 minute max) pilots, the best of which are selected to compete by the sites founders, and subsequently killed or given life as returning shows, according to the whims of a live audience. Audiences selected pilots are then titled ‘Prime Time’ shows, and return to compete again."

There's a number of these locally-focused film festivals, such as the Angel Film Festival going on in London throughout August. This is where YouTube needs to be heading - to a position where it is enabling a network of user creativity (Umair) and improving the net quality (and therefore value) of output by aggregating and filtering audience reactions to that content. Let's go to Robert Young and a two-month old post at GigaOm:

"Think of this way… what if 'American Idol' had been produced solely by the capabilities of the contestants themselves, without the expertise and talent of the show’s producers, directors, writers, etc. As talented and entertaining as the contestants are, the resulting production quality, the level of emotional engagement, viewership/ratings and monetization potential of the full package would likely be far inferior to what we all see on the air today. Well, social networks should be seen in a similar way… people want to express themselves and the platforms that allow them to do so with the most creativity and production value, are the ones that people will flock to."

Why does this interpretation of YouTube's future incline me towards eBay? Because eBay really gets networks and the value of the network effect - and it is by far the most defensible of the big four web properties (Fool.com) for it. Its strategy is clearly predicated on building on this network of buyers and sellers in different verticals and categories - PayPal, the eBay auction marketplace, Skype (not forgetting Craigslist/Kijiji). It has the payment platform that could monetise the best of YouTube (PayPal micropayments) and the distribution platforms to handle a range of content types (this is what Skype was really for, says the ever-prescient Adverlab). It is the online marketplace, which is what YouTube needs to get beyond its current amateurism and become a source of seriously watchable (therefore valuable) TV and film output. And finally, of course, eBay has a proven willingness to pay quite extraordinary premiums (Techdirt) for assets that fit this strategy, in a way that Yahoo! and News Corp have never really demonstrated.  The eBay marketplace puts video creators of every discipline together; YouTube plus Skype equals an audience and a distribution platform; PayPal allows creators and eBay to share in the revenues where the content has a monetisable value. No other buyer quite so neatly rounds off a marketplace, a distribution platform and a commercial model. Here's to another billion eBay dollars changing hands some time soon.

Update: in comments, Lokesh Kumar makes the excellent point that "YouTube can also provide a platform for EBay sellers to put their product promotion videos and demostration of how to use the product". Very true - the synergies are more extensive the more I look at it. 

Comments

[Lokesh Kumar]

YouTube can also provide a platform for EBay sellers to put their product promotion videos and demostration of how to use the product. For that matter, YouTube should even explore the possibility of any product manufacturer putting up their product use demostration, so buyers can just go their, see how to use and troubleshoot the product. It can even serve as pre-buying comparision guide for potential buyers, where they can watch the product use and decide whether to buy or not.