Is Facebook Worth as Much as YouTube and Why Microsoft Doesn’t Get It

Robert Scoble is out with a post today asking the question if Facebook is worth as much as YouTube as well as offering his own thoughts on why Microsoft didn’t buy YouTube. According to Scoble it comes down to the fact that Microsoft thinks in terms of build vs. buy and that they think they can build it for cheaper. But they are only looking at the technology, not the community.

“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.”

So my own opinion on the matter? First off I do not think that Microsoft gets the web. This is unfortunate. Late last year, here in San Francisco, I sat through a press conference where Bill Gates and Ray Ozzie talked about how relevent was going to be as an internet initiative. I titled my post at the time “Microsoft Turns Web 2.0” and was impressed with what I saw at the press conference with the potential of It seemed like something more interesting than just another “My Yahoo.” It seemed like it had potential to do interesting things in the social networking space. But here, almost a year later, do I use No, never. is not relevant in any way to what I want from the web. And that’s too bad.

Scoble says that he told Microsoft that they should buy flickr. Earlier this year at CES I was talking with someone at Microsoft and I asked something about Media Center and Flickr and the question I got back was, what is flickr? What is flickr? Ok.

Now I’m not saying that my anecdotal incident about a Microsoft employee in a non executive position not getting Flickr, yet alone, knowing what it was, isindicativedicitive of Microsoft not getting Web 2.0. But I do think that it sucks that doesn’t seem to feature or incorporate all of the various things that I love on the internet. Flickr, Zooomr, digg, delcious (or now blue dot that I’m trying or Ma.gnolia which I still need to try) or reddit or blogger or sitemeter or techmeme or pandora or FM or technorati or Odeo or PodTech or 30 boxes or or… yes, YouTube or Facebook, and… well… you get the idea.

It seems like all of the relevant internet technologies that I’m interested in are not coming from Microsoft. And I think Robert is right. I think that building something is one thing, building a community is something else entirely. Microsoft should step up with all of that cash and buy something interesting. I actually really like Microsoft. I love their Media Center technology. I love their Media Player potential. I like their XBox 360. They just don’t get Web 2.0. Their idea of Web 2.0 is RSS when there is so much more than that going on.

As to the second issue that Robert addresses being is Facebook worth as much as YouTube, here I’d have to say I disagree with Robert. I actually think Facebook is worth more. Robert’s argument is that since everyone is talking about YouTube, even grandmothers, and not as many are talking about Facebook that Facebook isn’t as valuable (that’s an over simplification of his point but it’s how I read the gist of it).

What you have to look at with Facebook though is not how many people are talking about it or using it today, but how many people could potentially be using it in the future.

Look at Flickr. When Yahoo bought them for $35 million nobody knew who they were and they had a little over 4 million photos on their site. And now look at them today with over 260 million photos on their site. Sure partnering with Yahoo! and Yahoo! promotion and money helped, but really Flickr had super viral technology creating the hotest photo playground on the internet. The power of flickr was not who knew about them or how many users or photos they had. It was the potential. And I think as flickr has become more popular that this has panned out for Yahoo. At the Future of Web Apps conference earlier this month I think every single speaker that spoke for two days mentioned Flickr somewhere in their talk. Powerful stuff.

So you can’t look at how many people know about Facebook or are using Facebook today. You have to look at the power of the technology to be viral. And Facebook has huge potential. Why is Facebook so popular with the kids? Because Facebook can get you laid! Yes, that’s right, Facebook can get you laid. And biology folks is a pretty powerful drug. But beyond getting high school and college kids and maybe even a few middle aged divorced folk laid, what is the power of Facebook? The power is that they have created a database that cross references everything your friends do and then tells you about it. XYZ friend just joined this group. Friend B just made friends with friend G. It is an intense social network that took a risk that people would trade privacy for the ability to closely track their friends and this can be downright addictive. It is also localized really well geographically allowing offline connections to be made from an online world.

So I look at Facebook and see that it has the potential to move beyond the highschool, college crowd and despite the concerns by some, it is being opened up to all. Yes, even married 40 year olds get a little excited when a 21 year old single female wants to be their friend on Facebook. All that stuff about looking but not touching. But beyond this Facebook is super personal and viral and has a way of connecting people offline which is more powerful to me than simply sharing kick ass video clips on the internet.

3 Replies to “Is Facebook Worth as Much as YouTube and Why Microsoft Doesn’t Get It”

  1. Eh, I don’t know. A lot of assumptions there.

    It’s true that MSFT is building a YouTube as we speak (by the name of Soapbox). And it’s true that there’s a far bigger challenge in growing the community than in building the site. But it’s overly speculative IMO to assume that MSFT hasn’t considered all of this.

    I’m sure MSFT is assuming that they can build it for, maybe, several million and then spend a billion on marketing and they’d still come out ahead.

    It’s also quite possible that MSFT took some advice from Mark Cuban. Only an idiot would pay $1.6 billion for a company that losses money and the little bits of revenue that they do generate comes off of copyrighted material that it doesn’t own. I mean, how long will it be until the content providers get serious about this site and start fighting it? And how much revenue would YouTube bring in without the copyrighted content? Let’s face it, without the hilarious clips from the Daily Show and everything else that’s (at best) marginally legal, we’d have “Lonely Girl” and a lot of other useless crap.

    And look at the bigger picture with the Zune, Xbox360 and MCE. I see the potential for a nice little echosystem where Soapbox fits in quite nicely……

    Or it could all fail miserably, I’m not one to predict. But I do think it’s not dumb to pass on YouTube. 1.6 billion is a bit of a premium for a 65-person company with no profit in sight.

  2. This post caught my attention with the mention of Facebook. I like Facebook. I agree that it has potential but for the changes that have come out in the past few months there are those who use Facebook who won’t like. Right now I just have a wait and see attitude about it.

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