Where in the world could a business be valued at US$1 billion on a Monday, and US$2 billion by Friday? On the Internet, that's where.
Both of these valuations, by the way, are highly speculative, and indeed the owner says he has no intention of selling anyway. Remember the parallel world of the fin-de-siecle weightless economy, anyone?
In little more than nine months since it was officially launched, YouTube has gone from unknown Web start-up hosting short video clips to a fully fledged sensation, the hot new star of the free-to-consumer Internet explosion. But neither Google nor Rupert Murdoch's MySpace generated the intensity of attention YouTube has enjoyed in the midst of this, the second dotcom boom.
The service, which currently shows about 100 million videos every day to some 16 million individual users, was apparently valued at a highly speculative US$1 billion at the beginning of last week.
By the end of the week -- after Sony paid US$65 million for far smaller video-sharing site Grouper, YouTube's theoretical valuation had doubled to US$2 billion, according to popular industry Weblog TechCrunch.
Prophets
The self-styled soothsayers of the Internet -- the bloggers -- floated the idea that Apple is the perfect buyer, since millions of video iPod owners need videos for their machines. Others say the perfect match for YouTube is an old, big media corporation looking for ways to reach a computer-literate audience.
At a billion dollars or even at two, the price of YouTube is cheap if it can save the titans of old media from the scrapheap. Murdoch's US$560 million purchase of social networking site MySpace last year transformed him from being characterized as dinosaur of the old world to visionary of the new. But the difficulty of putting valuing YouTube's mix of hype and innovation is self-evident. The company -- with the slogan "Broadcast Yourself" -- has no revenue to speak of and isn't the only video-sharing service. But it is certainly the most talked-about.
Maximum control
Unlike conventional TV, it gives users a high degree of control to watch and broadcast whatever they want and, crucially, is not a part of the mainstream media. But users are tricky -- they are not willing to pay for content and are by nature resistant to advertising.
Anyone with a personal computer and video camera can now be a broadcaster on YouTube. The company calls it "clip culture" -- snack-sized videos on-demand. Typically, these are short home-made, comic videos. There are also thousands of music videos, TV clips, news footage -- anything so long as it is not pornographic or overtly abusive.
As Apple did with iTunes, YouTube has recognized that music is the fastest and easiest way of building an audience.
"What we really want to do is in six-to-12 months to have every music video ever created up on YouTube," said Steve Chen who, with Chad Hurley, founded the company last year after discovering a way to upload videos from a dinner party.
Late last week, Paris Hilton launched the video single from her debut album on a special YouTube channel. In a twist, News Corp paid to advertise a new TV series next to the video of Hilton cavorting in the surf, producing revenue shared between her label, Warner Brothers, and YouTube.
The arrangement appears to be a success -- within days, Hilton's song had been watched a million times and her album is climbing the charts.
Hilton's experience may lead the way for others, Hurley said. He recently announced plans to launch new "brand channels," where advertisers can pitch their wares through videos and consumers can choose to watch and rate them just as they would for unsolicited items.
It may drive accountants crazy, but the reality of the new Internet boom is that exposure, not payment, counts.
To merely plaster the site with adverts could abruptly spoil the business, Hurley said.
"We're not looking at the model of trying to force people to watch ads ... it doesn't make sense to force commercials," he said at venture capitalist Herb Allen's Sun Valley media retreat.
Media moguls at the annual get-together flocked to Hurley, hoping perhaps that he holds the formula for reconstituting their fragmented media world.
Wide impact
Even if YouTube's economic potential remains uncertain, its impact has already been more widely felt.
While most widely viewed videos are intended to entertain, YouTube is now credited with a social and political impact. Ten days ago, Republican Senator George Allen of Virginia saw his hopes of becoming a 2008 presidential contender seriously damaged after he was shown describing S.R. Sidarth, who is of Indian descent and a campaign worker for Democrat opponent James Webb, as a "Macaca," a type of monkey.
To the established media industry, the site has proved itself as a place to test new ideas.
Last month, the pilot episode of new US sitcom Nobody's Watching was offered online. The show, which had failed to find a national US broadcaster, has now been resurrected by NBC.
Sceptics may be right to say the high valuation of YouTube is a manifestation of the madness that is creeping into dotcom 2.0. But it's also true that advertising revenue that was once allocated to mainstream media is rapidly being reallocated to the Internet.
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