The Downside

That’s right, last week Demand Media bought my site, Answerbag, from InfoSearch Media, and I will be going along with it. It was just eight months ago that I sold Answerbag to InfoSearch, and now we’ll find a new home again on Santa Monica’s 3rd Street Promenade with Demand Media.

The deal is somewhat bittersweet for me. I am excited to be working with Demand Media, particularly with Rich Rosenblatt and Joe Perez, both of whom I worked with at Intermix Media. They have a large network of sites that will open a lot of opportunities for Answerbag, so that’s a Good Thing.

I am, however, saddened to be leaving InfoSearch Media. The team at ISHM understand the Q&A space as well as just about anyone, with several execs coming from Ask Jeeves including George Lichter (CEO), Claudio Pinkus (Chairman), and David Warthen (CTO, former CTO and co-founder of AskJeeves). Alas, I go with Answerbag, so I’m starting tomorrow at Demand, and I’ll be looking to build Answerbag as much as possible with Demand’s support! They have demonstrated a strong commitment, and indeed they were willing to shell out $3M for it, so I believe Answerbag and I will have a good home.

I am happy for ISHM as well. They made 2x-3x on their investment in Answerbag, and now have a nice little pool of cash to fund their future projects. As George put it, “InfoSearch Media is small company with limited resources — we didn’t want to under nourish either Answerbag or ContentLogic. We saw the opportunity to work with Demand Media as a way to ensure that both groups could have what they needed. It’s kinda like having kids and learning to let them go. A tough decision though, to be sure.”

On to world news - after months of specuation, Google buys YouTube! Google has a lot of smart people, and they must have some secret plan for it, but I just don’t understand the purchase. Youtube has 2 strengths: Brand awareness and traffic. It has no technological or design differentiators over other video sharing sites. What makes YouTube special? Nothing, really. There are dozens of other video sharing sites that do the same thing, but YouTube is just the best recognized one.

So why would Google buy them? They don’t need the traffic, and their brand is already better than YouTube’s. The only thing that makes sense is if they’ve finally figured out a business model for YT, one that has eluded YouTube execs for two years now.

The most obvious route would be to drop video ads before or after the video clips they serve up, and given Google’s recent history of trying to broaden their AdWords/AdSense advertising platform to other mediums, this would be my guess.

The challenge for GooTube will be to integrate ads in a way that doesn’t drive people away from the service. Google revolutionized web advertising once before when they started using text ads that actually performed better than the increasingly annoying graphical ads, such as the infamous “Punch the monkey” or X-15 wireless camera ads. Perhaps this will take the shape of AdSense-style text ads showing at the end of videos. This would reduce the inevitable annoyance from graphical or video ads, and it would allow their existing customer-base to target their ads to YouTube videos with no extra effort.

So, yes, this has great revenue potential for Google, but enough to justify a $1.6 B price tag? And Google is sure to get sued for the copyright infringements on YouTube that went unpunished up until now because YouTube had no cash flow to go after. Only time will tell if this is a good move for Google or a debacle, but it will obvious one way or another in the next year or two.

This entry was posted on Tuesday, October 10th, 2006 at 2:37 pm and is filed under Internet, Me. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site. Your comments will appear immediately, but I reserve the right to delete innapropriate comments.