I respect the Economist’s business columnist (Schumpeter) and tech columnist (Babbage) but this seems to be a case of Schumpeter writing about tech.
Leaving aside HN loving the idea of Big Tech being weakened by becoming Relatively Small Tech, I don’t see how this is in Alphabet’s or YouTube’s interest.
The article assumes that such a divorce would be simple and it would allow YouTube to focus on taking on TikTok. It sounds like the exact opposite to me. YouTube clearly shares a lot of infrastructure with the rest of Google, especially datacenters and ads. Instead of focusing on high leverage activity like improving product, they would spend their time figuring out how to split datacenters, ads products, internal tooling etc. Almost all of their software stack is maintained internally. They would need to fork it and staff all of these teams. All of this is time wasted, work duplication and cost increases.
Most of the rest is questionable claims. Like the claim that a post-divorce YouTube would be able to focus on subscription revenue. You mean like YouTube Premium, a subscription they’ve had for years? They’re not replacing ads with subscription, they need both, so they need to recreate whatever ads infra they were sharing.
The only argument that made any sense was that it would buy goodwill with regulators. This is because regulators also like the idea of Relatively Small Tech.
I feel like this article was started with that Wall St mentality of “I wish I could invest in YouTube without investing in the rest of it” and it somehow tries to justify the rest the divorce.
Really, if I had to think about what YouTube wants to do I’d say they have to beat TikTok at the recommendation game. To do that they need as much data as possible (even if that sounds distasteful to HN), meaning the entire profile that Google has built on each person. In what world does YouTube build better recommendations after voluntarily giving up access to this data?
I’m keen to read an argument that argues this is in the best interests of Alphabet and YouTube. Ideally something that goes into specifics rather than vague notions of “focus”.
Just as a point of interest, AIUI the names "Schumpeter" and "Babbage" are "house names", not the real names of the people who write the columns. Any given column might be written by anyone, and it would still use the same house name.
Shumpeter and Babbage are the last names of famous people in fields related to the columns topics.
After a financial disagreement in 1995, Stephens was dismissed from InfoWorld and was promptly sued by IDG to prevent him from continuing to use the Cringely trademark. A settlement was reached out of court that allowed him to use the name, so long as he did not contribute to competing technology magazines
I think more fundamentally, youtube is far less vulnerable to the chatgpt garbagisation of the web. SEO crap is already bad, it will likely get much worse.
Youtube has actual good content from creators whose opinions I trust. Google would be moronic to give that up, they've spent long enough building it.
Eh... it's already started on YouTube. There's a whole new genre of movie content that has chatgpt summarize the movie while they play 15 minutes of clips. It's higher effort garbagisation because someone needs to at least do some low effort video editing.
Email has problems, yet the good and productive uses vastly outweigh the bad actors. The vast majority of systems humans use have benefit, otherwise they would be unwound by governments (eg. crypto).
People want to be creative more than they want to be destructive. The destroyers will be moderated, just as they are in every system.
I want a world where every kid can make their own Star Wars or Princess Mononoke and create more than Scorsese's entire career within a single year.
People who don't like your view of the future aren't "antiprogress" or "pro status quo," while you are imagining a little kid enabled to be creative and making lots of great stuff, others are imagining being inundated with targeted ads featuring their loved ones (and inevitably hurting people by showing them recently deceased loved ones, like when Facebook used to say, "you haven't spoken to this person in a while, why don't you send your dead friend a message?"), movies that go nowhere and mean nothing but are barely engaging enough that people watch them (AI is great at discovering solutions that satisfy the objective function while undermining the objective, eg, creating content that keeps you engaged but is devoid of substance), and deepfake misinformation masquerading as news.
You're imagining inventing a car and feeling the wind in your hair on the open road, others are imagining being stuck in traffic and cities becoming more and more dominated by parking lots. You're criticizing them for a lack of vision, but that's not correct; they're peering into the same future, and seeing something different.
That doesn't make them "antiprogress," they're critics with concerns that would be worth engaging with instead of dismissing. If you care about this project and you want to make the best version of it - ask them why they think that way instead of responding to the version of their concerns which is in your head, and then give some thought to how you could address it.
(I'm ambivalent leaning towards skeptical, so not much much of a dog in the race, trying to bridge a miscommunication.)
I like your analysis. I think you could generalize it to any (even more-hotly) debated topic. People can hear the same thing and imagine two (or more) very different things by virtue of life experience, upbringing, morals, or any number of factors that make us unique.
I don't think that's a bad thing. It's a good perspective to keep in mind when disagreeing with someone though.
I like this vision of the future of entertainment, honestly.
I like Star Trek the Next Generation... a lot! It was on when I was a teenager, and I like it because it's nostalgic and actually a pretty wholesome show compared to a lot of the shit that gets produced today. I'd love to see more than the existing 7 seasons, but they'll never make any more of them. It would be incredible if I could just ask my PC "Generate a new Star Trek TNG episode with the original actors and a believable, good story". I could watch a new one every week forever if I wanted! At the speed technology is moving, I expect we might see that in my lifetime.
We all saw the cheesy "infinite Seinfeld generator" a few weeks ago. That's v0.1. The technology will inevitably get better--in fact the only thing that could torpedo a realistic "infinite nostalgic TV show generator" are the copyright goons trying to hold it back.
Sure, but notice the trend toward prompt engineering and curation... for a show with a big fandom like Star Trek, you could end up with a whole community working on steering the algorithm, generating episodes, rating/up-voting their favorites. There's already a massive interest in fan fiction; this seems like it would be like fan fiction on steroids.
Stupid shower thought of the day: a block chain for fan fiction "canon", where the community maintains an official consensus of which AI-generated episodes are canonical and in what order, that then gets fed into the AI as input to generate new episodes while maintaining continuity, progression of plot and character growth. Probably with multiple forks.
I'm a filmmaker and love the arts more than you'll know. You're being incredibly sour, and I guarantee you that acting the way you do toward other humans (and yourself) subtracts way more from the universe.
GP was rude & out of turn, but there's no need to be patronizing like that. You're engaging in the same behavior you're criticizing them for, putting toxicity into the community/universe.
I imagine factory workers and butter churners said the same.
You know what really sucks? How labor intensive and capital intensive filmmaking is. How hard it is to make it into the field. How almost impossible it is to lead a production.
Think about all of the great ideas that wither on the vine because the Hollywood studio system only has so much capital and can only back so many projects.
Think about how many months and years go into a single film, and how few of them succeed.
Think about the opportunity cost of learning a creative skill - locking you out of all the other skills you could use to build your vision.
When the cost structures drop, people will be more creative and more cooperative. The long tail will be all of us.
> Think about all of the great ideas that wither on the vine because the Hollywood studio system only has so much capital and can only back so many projects.
Very few; great ideas mostly happen outside of the Hollywood studio system, which is largely about expensive packaging of low-risk ideas, not great ones.
Allow me to point to the thousands of creatives trying to cut it that cannot break in. I've met perhaps over a hundred of them personally. I, myself, am one of these people.
> which is largely about expensive packaging of low-risk ideas, not great ones.
The market serves different segments and there's a lot of intelligence built around vehicles of all types, shapes, and sizes. I don't think Hollywood is stupid at all. I think it's simply a small local optima when we're about to jump the peak to a new Mt. Everest.
> Allow me to point to the thousands of creatives trying to cut it that cannot break in.
I'm not saying great ideas don't fail to get realized.
I’m saying that the Hollywood systen is actively hostile to great ideas, so that the reason greay ideas fail to get realized is not the limited resources within the Hollywood system, which is more inclined to crush great ideas than to realize them with whatever resources it has.
(Limited money outside the Hollywood system might be a problem, though.)
> I don't think Hollywood is stupid at all.
I didn't say anything about its intelligence, merely its function, it is far from stupid.
In my opinion it's the McDonald's of movies. Not particularly good, always the same few usual suspects on the menu, nothing adventurous but mindless consumerism. And a few people get rich off it. It's business, not art. But people use it in masses because it's easy to get and they know what they're getting. Some excellent stuff comes out of there too but it almost feels like an accident sometimes.
If you're really into your art form, I wouldn't even try to get in there. Sure, alternative cinema won't make you rich. But if that's your goal you're in the wrong business anyway. Making it in Hollywood is more about who you know and who you f*k than about your skills.
> Very few; great ideas mostly happen outside of the Hollywood studio system
Often, "making it" in the Hollywood studio system is about being a part of an exclusive club. Very few people are allowed to proliferate their own ideas within the walled garden.
> I imagine factory workers and butter churners said the same.
Why? I'm not sure what are you talking about but I doubt most factory workers or butter churners were particularly excited about their jobs...
> How almost impossible it is to lead a production.
The problem I see is that if everyone is capable of making high-end movies the market will become oversaturated. There is only a limited amount of time consumers can spend watching tv so if making high quality (by current standards) content becomes trivial that will simply raise the overall "quality" bar. As long as there is money to be made it will make sense to invest into improving your content by investing into better "AI", GPUs or whatever. So we'll just end up more or less where we started.
I mean that sort of already happened didn't it? We can do things (CGI & production wise) that were impossible or even unimaginable as recently as the 80s or 90s. And things which were extremely expensive and required thousands of hours to accomplish back then are trivial now. So what? Did it become much easier to break in into the industry than before? Or did the bar just got higher?
> When the cost structures drop, people will be more creative and more cooperative
Maybe. But considering that most people and not very creative and most of their "ideas" are garbage we're just a likely to drown in a sea of technically/visually high quality content that's artistically and creatively worthless. By "garbage" I mean content that very few people will choose to willingly consume if they had alternative options.
Full video automation has been done for years. There is one infamous channel that automatically scrapes stack overflow posts and makes video versions of the questions.
YouTube was the home of AI-generated cartoon videos for kids. Remember the whole uproar about "Elsagate"? That was more than 5 years ago!
When you say "SEO crap", you mean text search. But the world is much bigger than text search today, lots of people use YT as a search engine. Because of that, the "Front Page" of Youtube looks like dumpster fire of the worst clickbait you can imagine.
Yeah basically. If people are watching AI stuff for entertainment, I don't really care or particularly think it's a problem. My issue is the impossibility of finding good information on any kind of paid products or services on the web.
Youtube genuinely does a better job on that and I think it'll be quite a bit harder for AI generated video to game it, if nothing else the sub count on the channel and the comment section (or its status as disabled) will be indicators.
Well, not really. I follow a few channels that tell interesting true stories over some photos of and around the event. Over the past year or so a few of them have started supplementing with AI, but others have just gone all in. Posts are much more frequent, but the music is AI generated, the pictures are all AI, and the script in an AI expansion of a Wikipedia article. Someone still has to edit it together (for now), but all the content is AI-based. I’ve been unsubscribing since the quality just isn’t there anymore.
Now, this isn’t a problem for the majority of my YouTube consumption, but I’m still seeing it creep in.
Ah, I've been seeing more and more videos that were clearly tossed together by some algorithm using a synthetic voice. The text may even be largely written by an AI and then proofed by a human. They use the same clips again and again, almost in rotation.
I think they're slowly going to drown out the good producers.
The TikTok woman voice is so grating it's oddly fascinating. It might be the most annoying voice I've ever heard but yet...
edit: TIL it's a real person and she (can) sound exactly like the TTS version... I'm cracking up listening to her. Thank goodness it's something she can turn on and off.
Well, let's start with the idea of “I wish I could invest in YouTube without investing in the rest of it”. Why not? YouTube is a more focused brand, with a world-beating product that's already active in multiple high-growth verticals (entertainment, shorts/vertical video, education, conspiracy theories). As the article says it can compete against both Netflix and TikTok (and probably Udemy, etc.). Aren't these high-growth areas worth investing in? aren't they more high-growth than whatever Google is doing this week? (I don't know, streaming video games to a watch and a new chat application probably).
And if you are investing in these areas and this is your only business isn't this "focus" all of a sudden important? (so you can actually compete in these businesses and potentially grow the business more?).
I for one like the idea --as well as I think Google needs to be broken up ten years ago. YouTube has scale, a good brand and would probably gain by being less Googley --i.e. iterative and consumer-focused. Not just YouTube, but the internet would be better off with a more focused YouTube (that also has less of your personal data as a bonus).
Is Alphabet lacking cash? Unless a spun-off YouTube were to issue more stock, they don't really care what investors would like.
If Alphabet needs money for YouTube investment they can issue more Alphabet stock, and investors can take that deal or not. But I doubt that Alphabet's challenges involve cash flow.
It might well be better for the world if Alphabet weren't a conglomerate. But it seems unlikely that it's better for them.
> They would need to fork it and staff all of these teams
I think the worst would be having to split the customer base. Their sales costs would increase a lot and they would loose pricing power. On the social networking front turn a leader into a me-too. This article confuses what these businesses seem on the surface (search+video) and what they really are (selling ads, keeping track of customer identities to do the same).
I have no idea about the utility of divesting YouTube but on this point...
>YouTube clearly shares a lot of infrastructure with the rest of Google, especially datacenters and ads.
I don't see this as a particularly thorny problem. Normally in a divestiture. Newcorp would just sign a 5 year infrastructure deal with Alphabet, and a 5 year deal for it's ad space. That is plenty of time to resolve any lingering issues.
I wouldn't be surprised to see Alphabet divest some business, however I think it is unlikely to be for tech reasons. It is more likely to be financial engineering, as growth stalls and share prices need protecting.
The problem is there’s no clear split. Some infra is owned and developed by YouTube teams, some by Google teams, and it’s hard to figure out the balance and usage and so on.
I’m some case you might have a service used by a Google product, operated as a platform by a YouTube team, that uses Google Cloud services, and runs on Google infrastructure. And the SREs may be “paid for” with YouTube budgets. Who pays who? And how much?
It’s not as clean as, say, treating these things all like cloud services provided by an infrastructure provider.
I'm reminded by calls for Apple to buy Nintendo. It focuses on a very specific upside while ignoring or hand-waving away all the challenges that would likely kill what makes these companies work.
I see the same kind of thing for Apple to buy Disney. In the abstract, the money and some shared goals make sense, but the reality would be a very challenging struggle to combine two ideologically different companies.
I feel like one of the only ways Youtube can be profitable is by having integration and being a first class citizen Google cloud's infrastructure & tech.
> Leaving aside HN loving the idea of Big Tech being weakened by becoming Relatively Small Tech, I don’t see how this is in Alphabet’s or YouTube’s interest.
What might instead generate more value is to spin out Google Workspaces (aka docs, slides, sheets, drive, etc.) It feels as if their business products are losing out to Microsoft, which IMO offer a greatly inferior collaboration experience for distributed teams.
To pick one concrete example Google Drive is poorly suited for storing business documents due to its hostility to hierarchy and poor tools for viewing and search. By contrast Sheets is amazing. We run our business on it. These product deserve a separate, innovative focus that does not treat document management as a search problem.
> YouTube clearly shares a lot of infrastructure with the rest of Google
That's the least of the problems. If there is the will to spinoff YouTube they can agree to rent that infrastructure and the people running it for, let's say, five years and see what happens next. No software will move, nobody will change desk or laptop. Paychecks will come from the same company. Then they'll gradually figure out if they want their own infrastructure in case the goals of the two companies get in the way of each other and YouTube has little leverage against Google.
They use the same repo. And everything related (internal libs, code review system, issue tracking, code search, etc) comprises a lot of the shared infrastructure. Are you suggesting "renting a space in the repo"? I guess it's possible, but would be weird and could have crazy risks depending on how hard you try to push on the "independent" angle.
> Instead of focusing on high leverage activity like improving product, they would spend their time figuring out how to split datacenters, ads products, internal tooling etc.
You mean like they haven't for the past 5 years?
I have no opinion on splitting them up besides "why?", but "Youtube wouldn't innovate on their product any more" is a weird position: Youtube hasn't innovated since it was created, they've only copied from other products (streaming, shorts, music, superchats, channel members), and did so in a mediocre way that's just disappointing.
Additionally, it's not quite right when the author compares YouTube to TikTok as direct competitors. I have used YouTube to learn an insanely great amount of new things which range from programming to car and home repairs. You cannot do this on TikTok.
Yes you can. There are tons of "home hacks" and "car hacks" videos. Hell, the whole "kia boys" auto theft phenomenon is driven by teens learning how to boost late model kias via tiktok. (https://www.inquirer.com/news/kia-boyz-challenge-tiktok-phil...) As far as programmings tips, just yesterday I learned about Python's casefold() function, which superceeds lower() for comparing internationalized strings.
Ultimately, the article argues for spinoff because of 1) focus, 2) more subscription experimentation, and 3) regulators.
But there's zero evidence YouTube is a distraction, it's already done lots of experimenation with subscriptions, and YouTube seems like the last of regulators' concerns with Alphabet.
I do think it's true there isn't a whole lot of strategic synergy between YouTube and Google or the rest of Alphabet. It's not like YouTube and Maps reinforce each other the way Docs and Slides do.
But the biggest argument for keeping them together is that there are large economies of scale, mainly regarding datacenters and edge nodes and all of the like, and that for this reason alone YouTube is an essentially perfect part of Alphabet's portfolio.
The synergy is that google has active advertisers with payment information on file. They can cross sell ads on any vertical to that customer list. A new company would struggle just to get advertisers to sign up and struggle to get the content and struggle to get the views. This is why google bought YouTube to begin with, it’s a vertical for advertising which is their business.
That's on the revenue front and is indeed important. On the product front: some search and generally data processing technologies are similar or even identical in Search an YouTube (YT Search, but definitely not only that).
Yes, I’m sure that’s so but not quite sure of how that implies anticompetitiveness.
If a YT competitor built a search feature that they thought was so good they spun up a search engine product, does that make them anticompetitive?
Every competitor has to implement their own solutions to these problems. Or, don’t? Search isn’t a barrier to entry. You could launch a video service without a search feature. If you can leverage something from your existing assets, that’s not anticompetitive. It’s like a lawn mowing service starting a Christmas light hanging service because they already possess the truck and most of the tools and labor resources. It’s the definition of being competitive. They may be able to offer lower prices to consumers because they get to use their assets during middle of winter when grass isn’t growing.
Or, and this is key to the bundled conglomerate argument, offer a service that wouldn’t otherwise be feasible (because the cost would be higher than what customers would pay.) In this case, bundling of the service is a net positive to consumers.
Not saying I disagree with you, but couldn’t the “economies of scale” argument be used to justify e.g. all cloud providers forming a monopoly, all hardware manufacturers doing the same, etc.? The only reason all tech companies shouldn’t aspire to monopoly status is to avoid regulators stepping in; they should aim as close as possible.
the main reason that all cloud providers don't form a monopoly is because they can't afford it. if google could buy microsoft or vice versa they totally would. of course they want the monopoly, but that doesn't mean they can have it.
Citation needed. When companies are split, sometimes they gain value and sometimes they lose it. There's no hard and fast rule, and I'm not aware of evidence of systematic downwards mispricing of conglomerates.
>When companies are split, sometimes they gain value and sometimes they lose it
Evidence suggests that spinoffs produce quite significant gains in shareholder value, here is one such study[1]. This isn't really that surprising as large conglomerates are slow, have managerial issues and are difficult to price and generally hold their best performers down.
this is very wrong. You can coordinate a campaign where you have video ads on youtube for let's say a new burger from McDonalds and then the same ads in Maps. Youtube is brand awareness, Maps is to bring customers to physical locations. There's TONS of synergy.
I always assumed YouTube’s technical foundations were significantly subsidized by the mothership, but I have no data to base that on other than looking at the $29bn/year revenue figure and wondering whether that amount of money would be enough to provision the amount of compute, storage and bandwidth that YouTube needs, plus all other expenses (including revenue sharing with uploaders). Yes, $29bn is a lot of money, but there is a lot of YouTube.
When I worked at Google I definitely noticed that YouTube was great at (ab)using untracked or very cheap resources. They definitely get huge benifits of otherwise idle data centers in sleeping regions. As the regular service traffic died off YouTube would put those idle cores to work transcoding video.
It is definitely the case that YouTube gets lots of really cheap compute by being part of Google. But that isn't a bad thing, they are making use of an otherwise wasted resource, effectively lowering the cost for products that need daytime capacity to serve humans.
Are you really saying that no company should be able to create a new product based on resources it already has?
Why stop at compute? Why not make it an "anti-trust" case that Apple leverages its same operating system and chip design across multiple devices? Or Amazon uses its same logistics network to deliver more than just books?
This is big business pretending to be small to distract attention from market dominance, and pretending to be creative to distract attention from a strategy of acquisition rather than origination.
Your argument is valid, but scale matters. Think of a game of Monopoly; you can usually tell who's going to win well before the game concludes, and you can guess which players will lose well before that.
And if Google hadn't acquired YouTube it wouldn't exist today. It would have either been sued out of existence or the infrastructure costs wouldn't be sustainable.
But let's not pretend that the little guy wants to go public. If they do, they are naive. Out of all of the companies, that YC has invested in, maybe 5 have actually gone public. Every startup knows the game is to get acquired.
The fact is that some things need scale to succeed. OpenAI for instance was never going to be able to afford the compute it needed without being subsidized by MS.
But how did YouTube get founded in the first place, and become successful as a video-sharing platform for original content? Or how did Google come to exist, when the market was dominated by (then-) huge firms like Yahoo, Lycos, and Altavista?
Both companies had a first mover advantage by deploying a more scaleable technical innovation in a somewhat stealthy way. OpenAI is subsidized as you say, but StabilityAI promptly ate their lunch int he image production field and is hoping to do the same with LLMs.
> But how did YouTube get founded in the first place, and become successful as a video-sharing platform for original content
A "successful" business makes more than it spends so it can be an ongoing concern. Any company can sell a lot of dollars for 95 cents. Youtube was never a "successful" business with a meaningful revenue stream before being acquired by Google.
> Or how did Google come to exist, when the market was dominated by (then-) huge firms like Yahoo, Lycos, and Altavista?
You realize you're arguing against the need for government regulation. This is the market working as it should. But Google became a success initially because Yahoo used it as their "search engine". Google initially offered to be bought up by Yahoo and Yahoo balked at the price. Google wasn't trying to go it alone.
Youtube got acquired before they monetized, but it was obvious that they would eventually do something like that. Running at a loss to gain market dominance with a distinctly different kind of service is not 'selling dollars for 95 cents'.
You realize you're arguing against the need for government regulation.
I'm looking at some gaps in your logic when you assert that anyone who ever wants to go public is naive; when Excite (not Yahoo) declined Google's $1m buyout ask, they were already running as a public service under their own brand and had a plan for text ad sales in place. Certainly it was worth trying to develop a technology product followed by an acquisition before the more challenging (but perhaps less interesting) business of raising capital directly, but there was a widespread view at the time (among both tech and VC people) that their product was good enough for them to go all the way.
I'm not trying to debate the need for government regulation and don't know why you think this is some sort of 'gotcha'.
How many years would YouTube run at a lost if they hadn’t gotten sued out of existence first? How much of YouTube’s profitability now is directly related to both being able to leverage Google’s infrastructure at below market cost and being able to leverage Google’s adTech?
No, they're making the case for them being a monopoly. Unless Google is preventing others from purchasing compute or hard drives by buying up all of the supply, they are not performing any anti-competitive actions, which would not make them liable under any anti-trust statutes.
I don't think anyone's in doubt YT is a monopoly with how big and widely-used it is. It's just that they continue to survive because of how well they execute their plan of making a good service that gives users what they want (fast, instant access to videos that appeal to them) and pays out creators enough to where they can make a living, or even build a media company (LTT), off of the adsense and monetization opportunities YT enables.
The monopoly practice in this case is subsidizing a business with by leveraging a monopoly. Aka YouTube isn’t paying market prices on unused compute therefore Google is leverage its search monopoly to expand into another business.
Historically the concern was that railroads might get into say coal mining by charging competitors more to move coal than they charged themselves.
> Aka YouTube isn’t paying market prices on unused compute therefore Google is leverage its search monopoly to expand into another business.
What in the hell is "market rate" for compute? Google bought a zillion CPUs and hard drives and put them in data centers that they pay for. There's no "market rate", they own the infrastructure. They can do whatever they want with the equipment they own. A division using another division's spare compute capacity isn't in any way an anti-trust violation. What you're saying makes no sense at all.
Google cloud exists... Anyway, monopolies have specific legal restrictions on what they can do with their infrastructure be that railroads, cables, or data centers.
“Amazon EC2 Spot Instances let you take advantage of unused EC2 capacity in the AWS cloud. Spot Instances are available at up to a 90% discount compared to On-Demand prices.” https://aws.amazon.com/ec2/spot/
As a monopoly Google could sell the same capacity YouTube is using on Google cloud services and YouTube could then buy that capacity. If YouTube was treated as any other customer it’s fine, if YouTube got preferential treatment it’s not fine.
I doubt anyone is going to take them to court over this but it is likely illegal.
From reading your comments, it appears like you have confused having a competitive advantage with anti-competitive practices. Just because YouTube has access to cheap resources by its parent does not prevent a competitor from existing in or entering the market. Facebook, Instagram, Tik Tok are doing just fine without access to Google's resources. There are other practices that Google does which might fit the bill (e.g. ranking and prominence in search results, Android, etc.), but this isn't one of them.
Competitive advantage is fine that’s kind of the point of capitalism. So the problem isn’t that YouTube has access to cheap compute, that’s normally just a basic synergy that every MBA loves.
The problem comes from Alphabet having cheap compute left over from their search monopoly. In 1982 AT&T was broken up because it was using its local monopoly when competing in the long distance market. Again for 99% of companies it would have been fine, but monopoly = special rules.
So companies can't leverage their own infrastructures between divisions? They should have to offer every bit of their infrastructure at "market rates"? What's the market rate for me shipping boxes using Walmart's trucks? Should McDonalds be forced to charge "market rate" rent to Subway for counter and kitchen space?
Monopolies not random companies. Also, what’s legal isn’t particularly relevant only what’s enforced as nobody actually cares as about what infrastructure YouTube is using.
In that case are you saying it should be illegal for any company to leverage its resources to get into a new business? Should Netflix not been allowed to leverage profits it was making in shipping DVDs to enter streaming?
No, it’s not a question of money but of resources. If Google offers up their compute at market rates and YouTube is treated as any other customer on that compute then it’s not a problem.
Microsoft for example could have spent unlimited money on IE and the justice department wouldn’t have cared as long as it was treated as a business investment. However, leveraging the ability to change windows was seen as problematic.
Long term subsidies can also run into issues, but it’s believed YouTube is inherently profitable.
Actually, you're kind of making my point. Absolutely nothing came of the DOJ case with regards to IE bundling.
But that still isn't logical. Are you really going to say that a company shouldn't be allowed to use resources to create a new product? Should it have been illegal for Netflix to use profits from shipping DVDs to later bundle video streaming?
Should it also be illegal for companies to "subsidize" open source contributors? Should it be illegal for YC and other VCs to "subsidize" money losing startups based on previous successes?
How long should a company be allowed to spend money on money losing products to gain a foothold? Microsoft probably lost money on the first 2 generations of the Xbox. Should that be illegal? Should Microsoft not be allowed to throw billions at ChatGPT?
Microsoft lost. They avoided being broken up, but it’s absolutely clear they had broken the law. It’s not IE bundling alone that was at issue but Microsoft making it harder to install competitors and limiting access to some API’s to IE. They where legally required to change this and did in fact do so. https://en.wikipedia.org/wiki/United_States_v._Microsoft_Cor...
And the critical thing you don’t seem to understand is resources aren’t the same thing as money. Suppose Intel decided to change their CPU design so only their compiler would have access to the full instruction set, that’s not something money can buy. Anyone can bring lots of money to the table, only the monopoly can leverage the resources associated with that monopoly.
As to spending money, again it’s not about gaining a foothold because anyone can spend money. The issue is if someone is subsidizing a business to maintain their monopoly rather than operate a profitable business. Google didn’t get into fiber because they wanted to operate a profitable business they got into fiber to defend their websites. They didn’t cross the line, but you can see how long term subsidies of different business could be seen as desirable/problematic.
Microsoft did not in fact have to change anything about bundling the browser with Windows.
And just in case you haven't noticed, Intel isn't exactly doing great against AMD these days and doesn't even have a monopoly on chips with the x86 instruction set.
Do you think its also illegal for the cable companies that originally lost money on cable infrastructure and to subsidize the cable infrastructure to sell subscription content? DirecTV probably wouldn't have made money selling satellite internet. But it was able to do it cheaply because of its content delivery. Every company leverages its resources to have margins of scale.
Even HN can only exist as a free service because it leverages the resources it has from the rest of its business. No one pays dang to moderate HN. The moderation is subsidized.
I will say it again Microsoft broke the law and lost. The case was more complicated than a simple sound bite which is why you’re confused.
People get away with breaking the law constantly, you can do 57 mph in a 55 every day for 60 years and never get a ticket. Shipping Windows with a copy of IE was like doing 57, nominally illegal but not something they would have gotten in much trouble over. But like a speeder they pushed even further and got slapped down over it.
Intel has had an X86 monopoly at various points. Doing something when they aren’t a monopoly can be legal when doing the exact same thing as a monopoly is illegal. Whether they currently qualify as a monopoly is debatable, but you don’t need a 100% market share to be considered a monopoly. AMD having a 20% market share is right at the edge of where Intel would be considered a monopoly but Intel has a great deal of market power.
> Microsoft for example could have spent unlimited money on IE and the justice department wouldn’t have cared as long as it was treated as a business investment. However, leveraging the ability to change windows was seen as problematic.
There is no confusion. Nothing came out of the DOJ case with respect to MS bundling IE.
Intel has never had a monopoly when it came to x86. IBM insisted from day one that were two suppliers for x86 before it even agreed to use the first chip.
I said “leveraging the ability to change windows” which is not limited to bundling.
Making it more difficult to install competitors is “leveraging the ability to change windows.”
They very much lost in large part because of a video shown in court of how difficult to install a competitor. They even lied about it by editing their own video which skipped steps showing they knew that behavior was problematic.
As to Intel’s x86 monopoly. Intel paid 1.6 billion in response to a monopoly lawsuit, and the EU fined them $1.45 billion and ordered it to end its customer rebate program. So they where definitely treated like a monopoly.
Yes. It wasn’t always difficult, but at various points there were extra hoops you needed to jump through. Again I will point out Microsoft editing a video to skip steps they clearly wouldn’t have done so if the process was reasonable.
They have even swapped peoples browsers with security updates before. Though more recent examples like KB 3135173 seem like a simple mistake, it’s more provocative when such things were common.
Not only is this false it was demonstrated as false in court.
“Microsoft later submitted a second inaccurate videotape into evidence. The issue was how easy or difficult it was for America Online users to download and install Netscape Navigator onto a Windows PC. Microsoft's videotape showed the process as being quick and easy, resulting in the Netscape icon appearing on the user's desktop. The government produced its own videotape of the same process, revealing that Microsoft's videotape had conveniently removed a long and complex part of the procedure and that the Netscape icon was not placed on the desktop, requiring a user to search for it. Brad Chase, a Microsoft vice president, verified the government's tape and conceded that Microsoft's own tape was falsified.”https://en.wikipedia.org/wiki/United_States_v._Microsoft_Cor....
Also I had forgotten about this bit: “Later, Allchin re-ran the demonstration and provided a new videotape, but in so doing Microsoft dropped the claim that Windows is slowed down when IE is removed.”
You seem to keep ignoring, though, that Microsoft lost :/. Like: Microsoft was charged, the case was heard, and Microsoft lost. The judge even ruled that Microsoft be broke into two companies! So, no: you are just wasting everyone's time here by insisting something that is 100% absolutely incorrect.
FWIW, the reason you might be a bit confused--though I do not think this excuses the time you're spending here--is that Microsoft did not end up broken into two because they appealed that part of the ruling and "won"... but that court of appeals actually re-affirmed that Microsoft's actions were illegal!
> The appeals court, in its decision, specifically rejected Jackson's order that Microsoft be split. "We vacate the judgment on remedies, because the trial judge engaged in impermissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality," the decision said in part.
This is essentially akin to someone being convicted of something and then appealing the decision to an appeals court that decides "OK, the defendant clearly is guilty, but the chain of evidence used by the district attorney was compromised and so none of it is admissible; thereby, you cannot send them to jail, even though we know they are guilty".
(edit: Also, there were, in fact, serious ramifications on Microsoft for this loss... Bill Gates largely had to step down as CEO due to having gotten the courts so mad at Microsoft that it was almost broken apart, the IE team had a difficult time hiring anyone due to the shame and Internet Explorer ended up on life support <- this is often blamed in Microsoft "not caring as they were a monopoly" but that is far from the truth, and the resulting chaos for Microsoft really allowed Apple an entrance with Steve Jobs back at the helm to retake a large market segment. I did a talk about The Fall of the Roman Empire that covered some of these issues, but more detail on IE is likely a nonsequitur.) https://vimeo.com/310654342
And this still has no bearings on the original thing claimed that Microsoft was found to be anti competitive for bundling IE. Not bundling IE was never part of the consent decree. No one ever said there was going to have to be a separate “IE company Inc”.
Job first came back to prominence with the iMac, then really took off because of the iPod. Microsoft didn’t fail in the music player market for lack of trying, they had multiple failures - first Plays4Sure and then the Zune. It was execution failure. The same with the phone.
Microsoft was never able to compete with an integrated player like Apple except for the Mac.
The degree of bundling was part of the decent degree, including IE with windows was not.
Aka the use of private Windows API’s by IE was explicitly banned in the decent decree.
The initial case which MS lost would have resulted in splitting the company, on appeal and by the time of the new trial (which they also lost) the government changed its mind into no longer seeking to break up the company. But that was on the government not a legal victory by Microsoft.
> However, the DOJ did not require Microsoft to change any of its code nor did it prevent Microsoft from tying other software with Windows in the future
First they where required to change the OS in a few ways:
“H. Starting at the earlier of the release of Service Pack 1 for Windows XP or 12 months after the submission of this Final Judgment to the Court, Microsoft shall:
1. Allow end users (via a mechanism readily accessible from the desktop or Start menu such as an Add/Remove icon) and OEMs (via standard preinstallation kits) to enable or remove access to each Microsoft Middleware Product or Non-Microsoft Middleware Product by (a) displaying or removing icons, shortcuts, or menu entries on the desktop or Start menu, or anywhere else in a Windows Operating System Product where”
the only way to achieve the above is to change windows code.
The API issue wasn’t one of code it was one of documentation:
“The proposed settlement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three people who would have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance.[28]” https://en.wikipedia.org/wiki/United_States_v._Microsoft_Cor....
It publishing API’s may seem like a strange remedy but it was a common tactic they used to limit competition. Netscape for example couldn’t release Netscape for Windows 95 at release because while the IE tea, had access to API’s they weren’t providing them publicly until release.
> Nothing came out of the DOJ case with respect to MS bundling IE.
In the sense that there was ultimately a comparative slap on the wrist remedy, in part because of a favorable-to-Microsoft change in administration between the findings of fact on antitrust violation (in which bundling IE was a factor, but far from the sole factor) and the imposition of a remedy for those violations, yes, nothing much came out of it.
The original poster was originally focused on bundling. If DOJ had said Bill Gates kicked a dog while dressing up as clippy it would have meant nothing since there was no proposed remedy or anything that came out of the consent decree that BG had to stop cosplaying as Clippy and kicking dogs.
Also, U.S. vs Microsoft wasn’t limited to Netscape vs IE several other companies were involved. The first Prohibited Conduct was in terms of OEMs:
“ A. Microsoft shall not retaliate against an OEM by altering Microsoft's commercial relations with that OEM, or by withholding newly introduced forms of non-monetary Consideration (including but not limited to new versions of existing forms of non-monetary Consideration) from that OEM, because it is known to Microsoft that the OEM is or is contemplating:” …
“B. Microsoft's provision of Windows Operating System Products to Covered OEMs shall be pursuant to uniform license agreements with uniform terms and conditions. Without limiting the foregoing, Microsoft shall charge each Covered OEM the applicable royalty for Windows Operating System Products as set forth on a schedule, to be established by Microsoft and published on a web site accessible to the Plaintiffs and all Covered OEMs, that provides for uniform royalties for Windows Operating System Products, except that:”
> Microsoft for example could have spent unlimited money on IE and the justice department wouldn’t have cared as long as it was treated as a business investment. However, leveraging the ability to change windows was seen as problematic.
And how is it related to anything Google is doing?
And we shouldn't forget that, in the US anyway, it's not illegal to be a monopoly. The "antitrust" laws are about unfairly leveraging your monopoly position.
> Unless Google is preventing others from purchasing compute or hard drives by buying up all of the supply, they are not performing any anti-competitive actions, which would not make them liable under any anti-trust statutes.
Would the massive subsidization of YouTube’s costs not count? There’s nothing physically preventing a competitor from buying storage and compute, but it’s pretty clear that it would be extremely difficult to compete with YouTube if every user has to pay the actual unit costs to upload, convert, and play videos.
> but it’s pretty clear that it would be extremely difficult to compete with YouTube if every user has to pay the actual unit costs to upload, convert, and play videos.
That's on the user side, though. Like AWS and Azure, chances are GCP/Google's internal hardware division bills internal teams similarly to external customers (especially as Sundar continues to demand cost cuts). Of course users themselves can't go and make their own website and experience the same economies of scale that only big companies can achieve, but if competitors come in (like ByteDance) there's nothing stopping them from stealing marketshare from YouTube if they invest in some colocated servers in key markets.
> Like AWS and Azure, chances are GCP/Google's internal hardware division bills internal teams similarly to external customers (especially as Sundar continues to demand cost cuts)
Having worked on such large conglomerates it’s closer to friends & family discount than from large external company discount.
There’s also transfer pricing and other accounting ways to improve numbers.
This is so widespread that one such company had <company color> dollars (internal purchases) and green dollars (external customers) pricing.
When Disney+ "buys" the right to stream the latest Marvel movie from Marvel Studios, the company as a whole has to back out the revenue so not to count it twice. But still show Disney+'s profit.
Why would they have to “back out” revenue”? Revenue for one department has to be an expense for another if they are buying and selling from each other, and that would cancel out in the company wide financials.
Disney+ buying from or selling to Marvel would not show up as profit or loss for Disney.
Let's take a simpler example. Apple Retail Stores and Apple corporate. For awhile Apple Store profits were broken out separately.
Making up numbers:
It costs Apple $800 to make a MacBook. It "sells" the MacBook to Apple Retail for $900 wholesale. Apple corporate now has revenue of $900 from the Mac it sold.
Apple Retail sells the same Mac to the end user for $1000. Apple Retail now has revenue of $1000.
Apple Corporate claims revenue of $900
Apple Retail claims revenue of $1000.
Apple claims a revenue of $1900. But it has to back out $900 of revenue so it doesn't double count it.
Apple wants to show that Apple Retail is profitable.
I used Apple instead of Disney in the example because it is much simpler to show one item being transferred from Apple to Apple retail than it is to show a group of movies being transferred to Disney and Disney selling a subscription.
I spoke about "revenue" and then I said "profit". I was inconsistent. "Profit" would have been cancelled out. "Revenue" would have had to be backed out.
That's not in any sense of the word how anti-trust works.
That's just like saying that car manufacturers can't use idle capacity to help start a new line of vehicles just because a new car manufacturer couldn't create a new car line.
No, it’s not comparable in any ways. Car manufacturers sell cars. That’s their main business.
Here we have Google using its dominant position in another market to prop up another activity through an advantage. That’s most definitely fall under anti-competitive law at least in Europe (I don’t care about the US. The modern interpretation of American antitrust laws is a complete joke).
Apple's main business was selling computers. Should they not have been allowed to branch out to sell phones or before that music players? Netflix had a dominant business in shipping DVDs to customers. Should they have not branched out to streaming?
It's silly to say that companies should never be allowed to branch out to other businesses.
Netflix very much had a dominant position in DVD rentals at its height.
Apple had a dominant position in selling music and in music players by 2006. It was the number one music retailer in the US. It very much used that to get into the phone market and part of its early success in the App Store was that it was built on top of iTunes and it already had more credit cards on file than any other company in the US besides Amazon.
If you're not arguing that a company shouldn't branch out, are you arguing that once a company gets a certain size, it shouldn't be allowed to invest those profits and resources into another industry?
By 2011, Apple was the most valuable company in the US. Should it not have been allowed to start selling watches, home stereo equipment and AirPods?
> Netflix very much had a dominant position in DVD rentals at its height.
Is this true? My recollection being a netflix DVD customer is that brick and mortar rental stores were dominant until netflix streaming upended the DVD rental dynamic. Would love to see some data on it though!
There is a long story about how just when it looked like the combination of BlockBuster brick and mortar + mail in was about to deal the killing blow to Netflix, Carl Icahn came in and snatched defeat out of the jaws of victory.
Which, again, makes the anti-trust case stronger. The case being: Google leverages one of their businesses (providing compute) to build an anti-competitive moat around another of their businesses (youtube), and it's so effective that they have driven all competitors out of the market.
By nearly any standard, Google's control of YouTube should be a prime anti-trust target.
Being a monopoly isn’t illegal, abusing your monopoly is.
And how does “providing compute” even matter, YouTube is just using google servers like every other google service. Not like they’re getting something for free because they’re part of the same company.
> Google leverages one of their businesses (providing compute) to build an anti-competitive moat around another of their businesses (youtube),
You speak as if providing compute is their primary business. Youtube, existed long before their compute. They already had all their own compute. They only got into providing compute because they figured they could beat AWS with their own infrastructure.
Anti-trust wouldn't apply here because there is very little stopping someone from creating a video hosting company and doing fine. Plenty of alternatives exist as well here, Tiktok, Vimeo, Twitch, Patreon all to varying degrees of scale.
Where I would try to nail Google/Youtube for with anti-trust is the merging of Music and TV/Movies into Youtube as well as the reliance of Google ads on Youtube. Both of those are incredibly annoying to deal with as a competitor and give Google the ability to corner the market on multiple fronts. Roku has highlighted this themselves, Google leveraging Youtube to make brand deals that other competitors cannot.
Eh. Using spare CPU capacity is not really anticompetitive behavior. That’s just an efficient enterprise. Something like Google favoring YouTube in search and suppressing their competitors would be actual anticompetitive behavior.
What OP basically described is use case for cloud computing and spot markets. Even if only internally.
While it could be made open, I don't see any regulatory reason to. We want companies to reduce waste, and it doesn't make sense to require all companies to build public facing cloud, and integrate their flagships into it, just to open it up to their competitors. It would be like telling Apple that its factories reusing scrap aluminum to make iPhone cases is an unfair competitive practice.
Antitrust isn't supposed to tamp down on those kind of efficiencies. Google offers the idle time on the market as well with spot instances, so they pay an opportunity cost.
I bet an individual with a static IP could make more money self-publishing than using youtube. I see federation and countless other things that compete with youtube. Access to "free" compute time. Any "free" compute time is likely to be transient and nothing to build a business on.
“In our case, we developed a custom chip to transcode video, as well as software to coordinate these chips. And we put it all together to form our transcoding special brain – the Video (trans)Coding Unit (VCU). We’ve seen up to 20-33x improvements in compute efficiency compared to our previous optimized system, which was running software on traditional servers.”
If I had to guess these are used for urgent video transcodes. New uploads to popular channels and on-demand transcoding. I suspect that CPUs are still often used for background batch encoding. But maybe 20x is enough that the power cost of extra CPU usage isn't worth it and they will do it all in hardware.
Presumably Google could spin out some of those unused resources with spot pricing but certainly it's easier with their own highly instrumented workloads.
So I'm skeptical that anything is actually "free" and, at a minimum, I'm sure has internal transfer pricing that has YouTube paying a reasonable value for the resources it uses. And I would furthermore assume that Alphabet management is satisfied with what YouTube's income statement looks like given those transfer payments.
For sure. It isn't free, they are just making good use of otherwise unused capacity. Much like spot instances can be dramatically cheaper they are using the cheapest available resources. Plus they are happy with being preempted at any time or their work being slowed so they are working with an even tighter contract then GCP Spot Instances which have minimum runtimes and preemption notices.
It is hard to decide if this is unfair or not. It is true that Google doesn't offer this exact ability to external customers but most customers wouldn't want this type of very unreliable infrastructure. If there was a market Google or Amazon would likely offer it (basically a super-spot which has less guarantees)
The commentators point was that YouTube may not be as strong of a stand-alone company as the article believes if the COGS is inaccurate because YT gets tons of free resources via Google.
If they spun out Youtube, then Google could sell access to idle data centers. Basically spot instances, or maybe you describe some task (with e.g. a docker container) and then GCP runs it at some point in the next 24 hours in some datacenter.
YouTube also functions as a network offset, no? Egress from YouTube helps balance ingress from everything, which should lead to cheaper network settlement.
I worked in WANOPS at Microsoft in the 90s, so my understanding of billing is literally decades old.
Why would YouTube not get Borg charge-backs? YouTube does pay for the infra it uses. And it's likely much cheaper than it would be if it were an independent company with its own data centers.
But separating YouTube and GCP into separate companies would presumably cause GCP to expose pricing / scheduling modes that would enable more compute to take advantage of regional downtimes. I'm sure there's plenty of ML training jobs that are just aching for regionally idle compute time.
> It is definitely the case that YouTube gets lots of really cheap compute by being part of Google. But that isn't a bad thing, they are making use of an otherwise wasted resource, effectively lowering the cost for products that need daytime capacity to serve humans.
Google could rent this compute capacity to the masses, allowing for healthier competition.
> Google could rent this compute capacity to the masses, allowing for healthier competition.
They could, but no major corporation wants healthier competition. They want no competition whatsoever. So there is no reason at all for Google to do this, and every reason (from their point of view) not to.
From what I'm aware, a lot of these larger companies basically treat other parts of the business the same they would customers; very important customers, but customers all the same. If YouTube wants more cloud budget, it comes out of their budget and goes into revenues of the Cloud business unit. Not quite that simplistic of course, but in essence it's meant to drive competitiveness. No special privilege's just because you're part of the same team. If an external company is paying more, for more compute, the business goes to them.
E.g., yes they'll "pay" for compute, but they'll do so at cost. And they're also allowed to deploy a monitoring widgets to other orgs' data centers to find when they're at low utilization, and then argue "at cost" is actually near 0, because the compute resources were just sitting around anyway. And then have the search team agree because YouTube promises to build the new data API search has been asking for forever.
If you ultimately report earnings on the same P&L, USD is just monopoly money you trade around to get things done.
Yeah I think this is generally true, although YouTube is a weird case because there's literally no equivalent customer with even a fraction of the compute volume.
Think of it less as a subsidy. Instead, think of this—
Team A is running a database and needs to buy disks with a certain amount of IO capacity.
Team B is running YouTube and needs to store tons of data.
You add up the IO + storage requirements from team A and the IO + storage requirements of team B and you buy disks capable of providing that combined amount of IO + storage. The resulting cost is much lower than the cost of buying disks for team A and disks for team B separately.
Is YouTube viable as its own company at the scale it operates? I have to imagine the infrastructure costs for YouTube would be extremely high and would likely cause YouTube to downgrade quality or try even harder to put a subscription behind even 1080.
Now obviously contacts can be signed and I highly doubt they would be paying normal prices in any cloud environment given this hypothetical situation. But it wouldn't be the same as it would be now.
Does YT need Google's backing in order to survive because they don't have the resources strictly in-house to build and pay for infrastructure?
Disclaimer: Not an Economist, not even close.
If in the unlikely case they spun it off and another competitor emerged, would YT's scale make it hard to compete with this new entrant? Read: Red tape, bureaucracy, etc, etc.
Essentially back to where they were as an independent company when they didn't have Google to "protect" them...
The inverse case is what usually comes to mind first though:
Would the company wither and die if not for an acquisition? Think about Sprint+TMobile. Until the deal, Sprint was in bad shape, second to Verizon with outdated tech - in the sense that emerging technologies were based more off of an evolution of GSM than CDMA.
If TMo doesn't acquire them, Sprint probably goes "poof" and their customers flee to the remaining carriers, further entrenching their positions.
This seems like it is usually the card European regulators tend to play, worrying more about market dynamics and how that will affect costs rather than just what people pay for service.
And yet up until a couple years ago at least Netflix served a higher percentage of web traffic. Don't know about now, maybe that changed.
There is only so many hours in the day and so many eyeballs watching, that is your upper bound. Bandwidth like that is not available to mere mortals, you would have to colocate with a lot of ISPs all over the place. Would take years to setup, not really even a question of money.
In the case of Netflix their content library fits inside one such colocated server, which can (or pretty soon will) do 1tb/s. Hundreds of thousands of streams per box are within reach, especially at YouTube potato resolutions.
In the case of Youtube while the long tail is very very long, I bet the most popular content of the week would fit into a similar sort of server.
So the serving portion at least is an endeavor on the order of magnitude of say 1 billion dollars a year.
No idea how to estimate letting anybody upload unlimited amounts of video of unlimited length and transcoding it into a dozen sizes. I think they did that early on to solidify their moat and it seems like a huge waste.
For me, YouTube is the most effective ad sponsored service by far. Users are forced to watch at least 5 seconds of ads before watching any content. This 5 second window is very focused as there is no time to context switch to anything else. Contrast this with Google search - sure there are some ads at the top but these are easy to mentally filter out.
Cue uBlock origin - I don’t recall the last time I watched an injected ad on YouTube. Of course most content these days is peddling some product, or has a quick word from sponsors - but at least I don’t have to put up with unrelated ads in the middle of a stream.
> And so the creators don't get paid when you watch their content.
Let's be honest here -- creators aren't really getting paid any meaningful amount of money from those ads anymore. Those days are long gone. That's why all YouTubers who care about revenue do their own ads as part of their own content, and/or use things like Patreon.
There's only one reason why YouTubers even bother to allow YouTube to "monetize" them -- if they don't, YouTube won't recommend them to other viewers.
This is untrue afaik. Even big channels with big self-sponsorship (eg Linus Tech Tips) still make (pulling out of thin air here) something like 20-30%+ of their revenue from native google ads.
As I understand it, the big channels do make decent money from their cut of Google's ads. But the vast majority of YouTubers aren't big. I think it's a percentage game.
> And so the creators don't get paid when you watch their content.
They could ask the users to pay for the content they produce and measure how many microseconds would pass before they switch to someone else's videos.
It's an option.
I don't want to watch ads, I skip sponsored sections, I feel no guilt about it, if they can't monetize enough and have to shutdown operations, I can survive without that content.
What would you say if I was dancing in the middle of the streets asking for money and blaming people who don't give any because "I am not being paid for the show I've put up, you ingrates!"?
Nobody asked or forced content creators to upload their content on YT.
Your analogy is only correct if you watch content that's recommended to you, but many of us actively watch YouTubers we have subscribed to, in that case it makes sense for the creators to get paid then.
Edit - Edited the comment a bit
95% of what I watch on YouTube is from YouTubers I actively subscribe to. I rarely use YouTube's recommendations (in no small part because YouTube is bad at recommendations for me).
I'm very happy to support the ones I follow who are doing it for a living. For most, I consider their cut of my Premium fee to be sufficient. For some, I go beyond by giving them money through Patreon and the like, or buying their swag.
TV commercials are paid regardless of how many people are watching them, you pay for the potential audience, not for the actual number of viewers (which is always presumed).
Putting pressure on the viewers (us) to undergo the torture of constantly being nagged by glovo and audible ads every 15 seconds, it's frankly the best way to not get any more viewer and scare the old ones away, for the content creators.
You want to advertise on YT?
You pay for it and hope people will watch your ads, if they skip them, they are probably sh*t and you need to make better ads, not force people to lower their standards.
If I had to choose between seeing the ads by YouTube and seeing the creator's own ad, I'd choose the second.
I don't really know why. But if I turn off ad blocking, YouTube's own ads are way more obnoxious and intrusive. Maybe it's because every advertiser has figured out they need to cram as much shit into a 5-second segment? Or maybe it is because seeing an ad at the very beginning is much more psychologically disruptive (or if the YT ad is in the middle, it is usually inserted without any regard to the video, even breaking up sentences).
Even with sponsors, adsense is always an incredible driver of revenue[0,1] especially as more and more people (especially in the US) have an iPhone which prevents any ad blockers within the YouTube app.
And YouTube Premium views pay out a lot more per view than any ad-supported view[2,3].
Youtube ad revenue is a very small part of income made from creating Youtube videos. Most people who makes videos take up sponsorships which are way more lucrative.
It could be argued that the worst thing that happened to ads are targeted ads. The targeting part manages to insert irrelevant ads at the most inappropriate times, even after invading users' activity across the web. Even simple non-tracking ads like a word from the sponsor are sometimes relevant and manages to avoid invasive breaks.
Ignoring the issue that targeted advertising requires surveillance, my biggest problem with it is that it removes the only useful thing about ads:
You used to be able to tell pretty quickly what demographic any given content was made for by noticing what ads were running with it. Targeted advertising removes that signal.
One time while working at Google, someone sent me an email linking to a video file related to our work. Before I could watch the video, I had to watch an ad of a unicorn pooping and then a man eating it. I was quite repulsed and livid about it.
Cue the people implying that blocking YT's ads is a form of theft.
I'd gladly pay for ad-free YT, mostly to send the message that I will never ever go back to watching ads. The problem is that google is already stealing my data.
Where is the stalker-free option? Of course, I'd never trust google anyway...
But, as you said, google is already stealing your data anyway. Would paying a bit of money every month really make that any worse?
But aside from that, it's totally possible to minimize your exposure and still pay for Premium. What I do is have a Google account that is only used for YouTube, paid for through a prepaid debit card, and I only watch YouTube on a single tablet that is not used for any other purpose.
It's not perfect protection, but it's also not terrible.
If I give data thieving Google money, I am sending the message that I am OK with their data theft (regardless of going through ridiculous hoops to keep them from stealing it).
YouTube is the last Google service (outside of Android) that I still use. I'll be ditching it as soon as some other service comes reasonably close to being able to replace it for me. That hasn't happened yet, but the day is coming closer.
Your point is certainly valid, but I have a slightly different perspective on the matter. Google Search Ads hold a certain magic that is unparalleled in the digital marketing world. Unlike video ads, which can be intrusive and irrelevant to a viewer's current needs, Google Search Ads are precisely targeted to solve the exact problem or question a user is currently facing. I've personally experimented with YouTube ads and discovered that while they can be useful for building brand awareness, they don't always lead to direct website traffic. As my company grows, I've realized that spending money on platforms like TikTok or Facebook simply doesn't make sense, as we can't yet promote our products in high enough volumes to truly stick in a user's memory. However, with Google Search Ads, we're able to reach potential customers at the exact moment when our product can be of service, leading to higher click-through rates and ultimately, a higher conversion rate than we could ever achieve with video ads.
As a consumer, this is 90% of the reason I avoid Youtube as much as possible.
EDIT: Also just because people are forced to watch 5 seconds of an ad doesn't mean it's got any measurable positive effect (for the advertiser) whatsoever.
I think if the ads are relevant it is a really good system. I’m only annoyed when ads are not relevant. Unfortunately the ads are irrelevant 90% of the time. These days they are sometimes not even in the right language - not sure what is up with that.
Same. Which is a tough spot for YouTube. The user's with the most disposable income and possibly niche targets for high value products are inaccessible.
I only pay $9-10 per month, whereas there are some companies who would pay way more for me (eng leadership/founder) to learn about their product. It would be very expensive CAC (cust. acquisition cost) but maybe worth it for a some niche products.
Maybe Google needs a way to "recommend" reviews for products in the video recommendations so that businesses can pay for placement (like Google Ads).
I would say "please don't give them any ideas", but I already ignore YouTube recommendations anyway, so that wouldn't actually bother me.
However, if YouTube found a sneaky way to get ads in front of me regardless of my premium membership, that would eliminate the entire value of the premium membership. And, for me, it would reduce the value of YouTube enough to get me to finally ditch YouTube once and for all.
You can’t filter out google ads because you don’t know which are ads beyond the handful they label as such.
Google filters and shapes the results so much now that I’m inclined to say it’s all essentially advertising. That is, Google is giving you want it wants you to see in what order, and lately filters out anything that isn’t helpful for Google.
> It [YouTube] is an advertising juggernaut to boot.
> Messrs Page and Brin control more than half of Alphabet’s voting rights, and would not like to be the first titans of tech to start selling off the family silver.
Many commenters here have correctly pointed out that the business case presented in the article makes approximately zero sense. That's because the article is actually an antitrust argument disguised as a business analysis.
It's time for antitrust to hit Meta, Alphabet, and Amazon. At the very least.
Amazon: AWS is one of the most valuable businesses ever created. You don't need the retail arm any more, now that it is enshitting itself. Also spin off the media company, comprising Audible and prime video, to make a Disney competitor. Amazon would absolutely be more valuable broken up.
Meta: Meta has always run 3 separate products either way. Spinning off the loser (Facebook), and the non-social networking product (WhatsApp) would let Instagram grow wings against TikTok.
Google: Search, YouTube, ads, and technical infrastructure (cloud) can all easily be separated, and Search and YouTube could likely command an even bigger premium by treating other ad networks as first-class citizens. Google ads could get a lot more business too when they are not tied to other products (those products might compete with yours, driving you away from Google ads).
These hypothetical splits show the perils of having outsiders (including regulators) make decisions like these. Just some quick notes:
> You don't need the retail arm any more [...] spin off the media company, comprising Audible and prime video, to make a Disney competitor
The whole point of the conglomerate model they use (following Costco) is that the membership fee grants consumers access to a bevy of services. The services may not work a la carte. Further, spinning Amazon media to become one of the weakest Disney competitors doesn't obviously enhance competition or consumer welfare in media.
> Spinning off the loser (Facebook), and the non-social networking product (WhatsApp) would let Instagram grow wings against TikTok.
The "loser" (Facebook) generates most of the revenue and profit at Meta.
The Google analysis arrives at a viable conclusion (the ads business could be run as a utility), for the wrong reasons. (For ex: Search/YT would not get a bigger premium by treating as first-class other, weaker, ad networks. The near-monopoly is what drives pricing power and is frequently a reason cited for forcing a hypothetical breakup.)
Anyway, this stuff is not obvious or easy, even assuming people can agree on goals (which is difficult).
This is only true if external actors redefine "the service" to be something other than what millions of customers voluntarily purchase (Prime). For example, I subscribe to Prime because I get free/better shipping on goods as well as video. I don't know what % of my subscription fee I would allot to either, but fortunately I don't have to do that.
Not to mention, these other comments are for Disney. However, Disney is propping their business up with lots of other businesses. If you are going to make Amazon less competitive, you can't leave the giant business next to it in a better position. Disney will just buy it then.
Disney makes a lot of money in theme parks etc.; Walmart makes something like $42B annually in healthcare; Costco sells cars & travel packages; Kroger sells gas (petrol); Apple (also a competitor) makes most of its money selling phones.
Why leave all those businesses intact and target Amazon?
Frankly among the not-tech-first companies Disney is the one that should most be targeted. The fact they were allowed to buy LucasFilms and Fox media (minus Fox News and Fox Sports because they already own ABC and ESPN) was so stupid. The year before those purchases the collected movies of those 3 were most of the top movies at the box office.
Why, in this hypothetical, would the antitrust bodies see Amazon as needing to be broken up or otherwise restricted to improve competition, but not see acquisition by Disney as being something they should block?
Disney's business lines are pretty synergistic. You have a media company, at its core, that provides other entertainment (theme parks) related to its IP, sells merchandise, and runs 3 different online distribution platforms for the media companies.
The Disney corporation is built around exploiting the rights to these media IPs to the fullest.
In contrast, Amazon is the online version of Walmart that can also sell you computing time and makes feature films which are just a perk of their "fast shipping" club.
There's a pretty clear distinction here, even with one of the other mega-conglamerates (disney) that probably owns too many different content production units.
Prime Video isn't a monopoly, but Amazon clearly has Significant Market Power when it comes to retail. They're anti-competitively vertically bundling Prime Video along with retail delivery.
Their largest competitor is Walmart. Walmart's bundle includes video, fuel discounts, from-store delivery, long-haul delivery. Further, the Walmart.com e-commerce site is subsidized by the Walmart bricks & mortar operation.
Businesses are allowed to do more than one thing. I'm not sure when it became popular to try to strip down businesses to a single SKU each, and it's not obvious to me that consumers (or anyone) benefits from pursuit of that goal.
Could make a case that local retail is anticompetitive by not incorporating film production cost into a gallon of milk. Or maybe they’re anticompetitive because they have physical stores and do not need to bear the burden of labor/vehicle/fuel to deliver each order. I think it’s a bit absurd to call in the regulators. Retail is hyper competitive and part of that is they all choose these odd little perks/differentiators to entice customer loyalty. It’s a net positive to the consumer.
Amazon's whole retail business started by selling paper books. Extending that to kindle and audio books doesn't seem so outrageously "unrelated". Its more of an ecosystem which has legitimate benefits to the consumer. And once you have audio books, music and video doesn't seem like a huge stretch.... etc etc.
Apple is the obvious example of this. Do you think every single service apple offers should be broken into a separate company? Apple pay, apple music, icloud all seem to be "unrelated" but the consumer legitimately benefits from these things being bundled into a cohesive ecosystem.
Breaking these things into individual companies which has to be profitable based on just their one product would lead to higher prices and worse user experience, IMO.
For non-consumer facing products, the case is clearer. AWS / GCP could be split out nicely. The ad networks of meta and google could be independent without hurting the consumer at all.
I’m a long time paid subscriber to both Amazon Prime and Costco, and I can’t say I’ve ever thought of the services as particularly similar. Maybe that’s because I rarely use Costco to buy things online (I’ve only ordered a few online-only items and one travel package), which is the primary way I use Prime.
Prime certainly feels more like a bundle of unrelated things, with the streaming service, and cloud music/photos/ebooks/etc. stuff no one uses, and whatever Twitch benefits they have now. I guess Costco might actually have some stuff like that, but I’m not aware of anything other than warehouse access, some online shipping benefits, and the travel/car/“Next” shopping.
It's not so much being propped up, as at achieving better efficiencies. Leveraging the larger organizations compute resources and ads technology makes Youtube more valuable than a stand alone company would be, for example.
This isn't always true. A conglomerate isn't always more efficient than separated entities.
You wouldn't get magical efficiencies by combining an oil company with an airline, for example, even though oil is a key cost component of air travel.
The same goes for compute resources and ad sales - both are roughly commodity services with lots of competitors. Youtube gets some efficiencies from vertical integration with both, due to incentive alignment, but also gets a lot of inefficiencies from the added complexity and management and the need to keep up with competitors in the commodity part of the business, which can be expensive.
The semiconductor industry is a place where you would think you would see an obvious efficiency to vertical integration - designing your process technology specifically for your chips. In practice, vertical integration between the chip design and manufacturing sides is almost gone, with a few notable exceptions. This is because it is actually not more efficient to be integrated.
Technical infrastructure seems to be similar to me.
I'm poorly informed regarding breakups of this kind, and I don't have the experience/research to assess the infra costs of a streaming service like Prime video. Assuming the hosting costs are a significant portion of their expenditure, what would it look like in a breakup, what kind of deal would they be able to get from the newly spun off AWS?
> Assuming the hosting costs are a significant portion of their expenditure
I would consider this unlikely, for reasonable definitions of "significant." Costs to license IP and develop content are likely the dominant term in expenses.
> what kind of deal would they be able to get from the newly spun off AWS?
The same as everyone else, or it was a re-org and not a breakup.
There are lots of video streaming services that don't operate the bulk of their own infrastructure. They would simply become a customer of GCP, AWS, Azure, whatever.
AWS is only apart of Amazon for shareholder purposes. Even internally, word is that AWS bills all of Amazon's internal businesses similarly to how they bill external customers, so it's not like Amazon is getting super discounted/free hosting out of keeping them under the same unit.
They don't need to. Prime could still offer Prime Video / Music as a membership perk. But if the media services are independent, maybe it'd turn out offering one or more of the others, or letting customer pick and choose, would end up making more financial sense (FireTV can already be used to subscribe to competing services in addition)
I'm not saying it's necessarily a good idea - I don't have an opinion on that - but the bundling of services does not depend on them being part of the same company.
This misses the point. A breakup would put Prime Video / Music (are those two even allowed to be in the same company? Why? Who decides?) on the same footing as Hulu or Spotify. This would create independent third-tier players in both markets.
The consumer would likely end up paying more (because Prime Video / Music can't be run at zero or negative margins as part of a bundle; ditto for other media options like Spotify). Further, I'm not sure what goal would be served by doing all of this and increasing costs to the consumer.
Splitting it out as a separate service would not inherently stop Amazon from paying exactly the same amount towards Prime Video as it does today, and would allow the new company to seek additional customers unwilling to pay for the full bundle, so it's not at all a given that prices wouldn't go down.
But even assuming that'd not be the case, anti-trust law is in large part aimed at ensuring competitors have fair access to the markets, not minimising costs to consumers. It's presumed that over time the former will ensure the latter and/or improve service, but it's really a separate issue.
That said, I don't see a compelling anti-trust case for going after Prime Video anyway - there's plenty of competition in that space.
However, there is also another possible cost reduction in forcing unbundling as well for those customers who don't want Prime Video, but want the other benefits. Not at all convinced it'd be worth it. That's not the part of Amazon that's a competitive issue.
> Amazon would absolutely be more valuable broken up
That is total nonsense, completely irrelevant, and true.
Conglomerates being worth less than the sum of all parts is one of the stupidest parts of Wall Street. There is no actual rationale for this besides maybe it being easier to evaluate a company doing only a single thing? Specifically with regards to the examples given - Amazon, Meta, Google - it's the cross-subsidising and reuse of stuff that makes them profitable. Prime video without AWS' cache isn't a great competitor to Disney; YouTube on it's own will have a ruinous infrastructure bill that is subsidised by Google now; WhatsApp doesn't make money so can only survive on someone else's dime, etc. etc. Same goes for traditional conglomerates - of course GE were stronger before they split up into three. What will GE Aerospace do next time there's an air travel downturn like a pandemic? Crash and burn unless it has enough reserves, because it won't have the benefit of being propped up by different businesses that aren't impacted (like say GE HealthCare). Bombardier today are in a much worse spot, focusing only on a minuscule and volatile niche (private jets), but at least in their case it wasn't their choice, Boeing bankrupted them with protectionist tricks.
The real reasons to split them up would be to improve competition and the choice of consumers, not because "idiot investors think 'value' will go up".
> Conglomerates being worth less than the sum of all parts is one of the stupidest parts of Wall Street. There is no actual rationale for this besides maybe it being easier to evaluate a company doing only a single thing?
One example: some parts of a business need a positive consumer reputation and others don't. When you connect these under the same company you may end up with two business units that are each less valuable than if they were free to take the approach that best suited their business.
For example, an ad company that didn't care much what consumers thought about it would use fingerprinting to personalize ads and it's prevalent in the industry, but Google committed to not doing this. Why? My guess is that a big part was reputation: having an ads division that's tracking users with no opt out is inconsistent with the company-wide policies Google needs to be competitive in consumer markets.
In this case I think the effects are positive, in that the display ads division is closer to what consumers would want than if it were independent, but I think it's pretty likely that spinning DoubleClick back out would increase overall profits.
(I used to work at Google, and here I'm speculating about decisions made several levels above me that I wasn't a part of.)
It's pretty wild that your example of a good conglomerate is GE considering GE's a perfect of example of why conglomerates don't work. Gee I sure wish I could invest in that great GE Aerospace division, too bad if I do the jokers over at GE Capital are going to snort half of it and place the rest on black. GE was the notorious exception to conglomerates being terrible right up until it also turned into a massive shit show.
Would customers pay for Amazon services individually if they were unbundled? I’m guessing there would be significant drop off. Prime Video would implode. Subscription revenue wouldn’t be sufficient to fund content and it’s a short life from there.
Google side: from maybe a business idea, you could have it work. But from a technical perspective, it would be near impossible without years of engineering effort. Google has a ton of core internal infra that is shared between all the business units at Google. The only reason this is feasible is that the cost of running it is shared between the units.
Yeah I'd love to know how this "spinoff" would work. YouTube is an arms-length independent company but Google happens to have deployed dedicated, co-designed accelerators around the world to support their use case?
Privacy will be impossible as long as platform owners are in the ad business so the most important thing for me is to separate Android and Chrome from Google's ad business. For the same reason Apple and Microsoft should be forced to choose between being in the phone/computer or ad business.
I don't care too much about Facebook, no doubt they are capable of failing on their own.
I wouldn't even mind ads in Windows, objectively speaking, if Microsoft were to just give it out for free (as in no activation required).
What sucks about Microsoft and ads right now is they sell you a product and then also drown you in ads. Either I pay cold hard cash or they give me ads, but not both; they shouldn't get to double dip.
It's unclear to me how making these divisions dramatically increase their infrastructure costs (by either pulling them in-house or paying a premium to the original parent company) will "help them compete"
Are you sure that they will dramatically increase infrastructure costs? Large companies get amazing deals from clouds, and this is no exception to that rule. Their infrastructure costs might actually decrease because the clouds will have to compete for their business.
>Are you sure that they will dramatically increase infrastructure costs? [...] Their infrastructure costs might actually decrease because the clouds will have to compete for their business.
Maybe theoretically possible but I have doubts.
As Youtube's founding was February 2005, they now have 18 years (i.e. exabytes) of videos stored on Google's datacenters. Exporting all that to a competitor like AWS (even with mass Snowmobile transfer service) probably wouldn't make financial sense.
I worked on a corporate spin-out from a petroleum company and there was months of back & forth negotiation for "IT infrastructure services pricing" from the ex-parent company. The new spin out company was definitely not getting a deal from the ex-parent company and switching to other datacenter competitors wasn't realistic because the ex-parent already had all the data and the existing IT staff expertise to run-&-maintain the spin-off's proprietary systems. (E.g. think Lotus Notes custom programming workflows).
Google could realistically raise their infrastructure prices to an independent Youtube spinoff but that higher cost is still less than switching to Azure or AWS.
Hitting companies with antitrust when consumers have is a terrible idea. Antitrust laws were made to prevent monopolies giving consumers choice and preventing them from getting screwed.
Amazon is e-commerce, i have multiple choices to shop on web. Amazon has even benefited the consumer by forcing retailers speed up shipping. For cloud hosting, there are alternatives to AWS. There’s healthy competition in both fields.
Meta the consumer is the advertiser. They are the ones spending the money. For advertising, there are different channel and mediums. You could buy billboard ads, tv/radio ads, direct mail etc. Competition is very healthy.
Google the same thing. The consumer are advertisers. Thats the market.
Lets compare major anti-trust actions. Standard oil was the pretty much the sole source of oil in the US. Consumers had no choice. ATT another major antitrust case where there was just one telecom company in the US. Kodak where they were controlled all the film market.
? Meta: Meta has always run 3 separate products either way. Spinning off the loser (Facebook), and the non-social networking product (WhatsApp) would let Instagram grow wings against TikTok.
Three products which share data. I don't care what the law says, or what they tell a select/congress committee, nothing will convince me otherwise.
I used to support breaking up Meta, Google, and Amazon. Their market positions are pretty dominant, but not unassailable. Facebook barely avoided Snap eating their lunch with stories and now looks to be in a losing position against TikTok. Google vs. LLMs will be interesting to see play out. Amazon… is still in a very strong position.
Globalization is at odds with national level anti-trust. The past has shown that international companies supported by their governments would eat away at the smaller US companies.
I think this is the big reason that the US hasn't taken action against these companies. They view them as strategic, and want to keep a very friendly relationship.
In this case, treating the "US" as if "they" have a consistent, considered view that drives all their actions seems a little odd and vaguely conspiratorial. After all, it has been well reported that US politicians on both sides of the aisle are looking to put investigative scrutiny on big tech in the year ahead. And US regulators were broadly underutilizing antitrust tools across the board in the past, not just for big tech. That also seems to be changing.
Sure, the US pursues strategies related industrial policy and national security. The CHIPS act or the Inflation Reduction Act are examples.
But you don't need a "big reason" why to explain why US companies like these tech firms have been underregulated. It isn't isn't some mystery, it is just (unfortunately) normal. If US firms are grossly underregulated and under-punished for simple stuff like wage theft, you don't need to invoke strategy to explain why big tech has gotten away with anticompetitive stuff in the past.
Not combatting the merits of those break-ups, of which I agree, just wanted to point out that WhatsApp is a social media product at this point, because all the relevant social group interactions have moved there from Facebook the website/the app.
Just as anecdote, I don't have whatsapp groups for my fb groups. My whatsapp and fb worlds are entirely disconnected. People in groups from fb often promote Discord (which I don't like: real time chatting with strangers feels odd to me).
Facebook is aggressively promoting its own chat for groups, spamming it violently and so I'm forced to unsubscribe/ignore lots of chat groups now. Do people really need yet another chat platform?
> ust as anecdote, I don't have whatsapp groups for my fb groups
Exactly that, that the personal updates for close friends and family that we used to post on FB are now posted on several dedicated WhatsApp groups. Yes, that means that that former highschool colleague who you'd met once in the last 20 years won't get to see them, but it's still social.
> Facebook is aggressively promoting its own chat for groups,
Could be, but the WhatsApp interface when it comes to group chats is way nicer and more intuitive (especially when it comes to sharing photos).
> Meta: Meta has always run 3 separate products either way. Spinning off the loser (Facebook), and the non-social networking product (WhatsApp)
You don't think of it as a social networking product, but it is used as such. I consider Discord social media, and WhatsApp is honestly a text only Discord competitor in the grand scheme of things, all the group chats are reminiscent of Discord servers, but for people who dont care about all that Discord has to offer, even if they never heard of Discord. I would absolutely include chat platforms under social media.
I've never thought of WhatsApp as a social networking product. For me, it's just an SMS replacement necessary to talk to my friends outside of the US.
Not saying my perspective is correct, but I think of a "social networking" product as one where I'm talking to groups of people. That's not how I use WhatsApp. That's always 1-on-1 conversations with people I know in the real world.
Last I read, which was a couple of years ago, after Google search, YouTube is the next most searched "search engine". It serves ads. Is it really, from Google's POV that different than it's core business?
That aside, as we know now, Google wasted it's time with Plus. Instead it should have fleshed out YT's social aspects. While that's easy to say in retrospect, it's still not a bad idea if Google wanted to "social media" product.
If I was an antitrust regulator worried about Disney's dominance, I would just make them sell star wars and/or avatar so they don't own three sci-fi mega franchises. I'd also consider Pixar and Hulu. Why do things to Amazon in service of sapping Disney's power?
> Also spin off the media company, comprising Audible and prime video,
Prime video is what they use to get a foot in the door, then they know you'll want to extract as much value as you can from your prime membership, and that's done by buying shit from amazon
“Search, YouTube, ads, and technical infrastructure (cloud) can all easily be separated”
At a product-level view from 10,000 feet, it might seem this way. In reality, these are deeply interconnected systems that are 15-20 years in the making. “Easily separated” are the last words I’d use.
Well, YouTube-the-hosting-business definitely doesn't fit in very well with Goo-Alpha-whatever (being, really, an advertising-cum-PI-broker), but that's hardly the fault of the owning company.
Fact is: there is very little business sense in an outfit like YouTube. You have massive server costs, massive bandwidth costs, a fickle audience, a precarious copyright situation, and very little margin for recovery.
Yet, YouTube is and remains popular. Very very popular. So, you would think there is some room for a play there. And there have been sufficient suggestions from various parties on what that play should be. Increase advertising. Go full-Spotify. Et cetera, ad absurdum.
What YouTube has implemented is a mediocre mix of worst-case options: sure, customers can get a subscription, but it does not actually offer any advantages. And yes, partners can create opportunities, but only if they're a top-10 media company, and therefore won't create anything if their life literally depended on it. Smaller partners are smothered: Alpha-Goo-tube could listen to them, but they don't and won't.
So, YouTube right now is an entire market-in-itself waiting to be disrupted. Spotify did it for audio; who will be the disruptor for video, and when, remains to be seen. Given the current market conditions, we'll have to wait a year or two, but that YouTube is toast is pretty much a given.
I was unimpressed by the arguments in the article.
Focus implies that Alphabet cannot avoid being over controlling (why? Any evidence other than idle speculation?) whereas devotion to increasing quarterly shareholder value would somehow be hands off (LOL has the author ever worked for a megacorporation?), or eventually being bought out by a (probably overcontrolling) competitor (Disney? Netflix?) would by some miracle be less overcontrolling than Alphabet currently is. With a side dish of the assumption that Youtube would be better off with less control and oversight. Why is that?
The second argument is also weak. The claim is there are two ways to being ad sales in-house at Youtube (they... aren't already?) one is paying financial market middlemen billions to do a corporate split such that there will only (temporarily?) be in house sales dept, the other option is a cheap, probably money saving, departmental re-org. "We can save money by making a giant pile of cash and lighting it on fire". Naah, not taking the bait, doesn't sound profitable.
The third argument is the author is some kind of insider and our toothless and ineffective unelected regulators hate google more than they hate facebook (solely because he claims it to be the case), so splitting from google would reduce government regulation. I mean, we're just making stuff up at this point, aren't we?
The forth, unnumbered, argument is a restatement of the first argument, that Alphabet is inherently and uncontrollably hypercontrolling so "freeing" Alphabet from hypercontrolling responsibilities WRT youtube would allow better micromanagement of various AI projects. Now wait a minute, the first argument was Alphabet's theoretical control issues are "bad" therefore YT should leave, why is the forth argument that toxic management is somehow good when its applied to new AI divisions? I have a better idea, if the author repeatedly restates that Alphabet management is incompetent and detrimental to everything it touches, why let it ruin AI along with ruining Youtube, why not push to implement better leadership at Alphabet so all the orgs underneath Alphabet would benefit? I'm just saying if the repeated theme of the article is Alphabet is a "rats deserting the sinking ship" argument, well... why not fix the ship so its not sinking instead of coming up with elaborate and expensive evacuation processes? If Alphabet management is toxic therefore YT should leave to avoid it, then a couple paragraphs later claiming Alphabet management is toxic therefore they need to manage AI even harder, doesn't make sense.
> I always assumed YouTube’s technical foundations were significantly subsidized by the mothership, but I have no data to base that on
I'd venture to guess that YouTube provided more value than just their customer base. I often wonder how much of their tech stack made it into the larger Google org.
Example; for the longest time when you'd log into gsuite via a SAML IdP you'd notice a youtube url in the login flow.
There are only a few times when a spun off company can be worth more than an integrated one...
1) When the spinoff might have negative value. Eg. has big liabilities. But you don't need to make it fully independent to gain this benefit - it can be a wholly owned subsidiary.
2) When the spinoff can't get clients or suppliers due to the business of the parent company - eg. the renewable energy division of BP might not have much success getting charitable funding from green charities.
3) Where someone else wants to buy the spinoff for more than market value for strategic reasons. Eg. to have its patents, or to shut down a competing business.
I don't think any of these apply in the case of Youtube.
YouTube's problem isn't competitors. They already have most of the eyeballs on the planet. It's that anything new they do is going to cannibalize the rest of their revenue streams. Want to push people to more clips and create a revenue stream there? They need to prove to their creators it won't take revenue away from their existing videos. That makes them very careful to roll out new things. TikTok, by comparison, had no creators to lose, so they can go after new generations of creators or simply be another syndication channel.
What percentage can the investment bank handling the spin-out expect to skim while simultaneously talking up the share price of both Google and the spin-out?
(Rubs hands vigorously).
This would be an absurd move. Youtube is a property that relies on Google's ad infrastructure AND commercial relationship with advertisers to make sense. You split it and it becomes instantly less appealing cause you're dealing with another network so you can't coordinate campaigns as well as you can in the current system.
It's complete nonsense and shows the person writing has no idea how that particular business works.
I'm pretty satisfied with YouTube as a viewer other than Firefox on Linux can always decode the ads, but not always the actual content (many other sites have this issue as well).
There's so much great content on YT for just about anything. Gardening, mechanics, computers, games, sports, you name it. It's all there.
Most other platforms are quite vapid. I suppose that's fine for the drooling masses, but I'm a quality of quantity person.
This would be the worst time to spin it off. Tiktok is a threat but seems slightly subdued, things might take off for YouTube again.
On ads ATT has depressed revenue a lot but apples recent updates will mean better tracking soon and revenue will recover.
Everything is pointing up for YouTube (and meta), this is the worst time for a change in ownedhip structure. You should do that at the top not the bottom.
They’re releasing much more data to advertisers, meaning targeting on FB and Meta will considerably improve in the next few months. Which will improve performance for everyone.
With AI tech getting dramatically better quickly, we need to wait wrt restructuring the dominant players.
Basically, all the major players in the tech space are going to make major transformations to their internal services over the next 5 years. YouTube as you know it today is not going to be here 5 years from now.
It's time for Android to spin off google too. Their new "Did you know google made a PHONE?" commercial feels like terrible marketing. They should market it something like: "Android, powered by Google", and take advantage of the view that google is at least seen as a modern bell labs (by normals at least), so people can get the feeling that smart people are working on android. Otherwise I don't think anyone really knows android and google are the same (present company excluded).
Yes and next anti-trust should break up Microsoft for bundling office and break up the cable companies for bundling cable channels. We should also get rid of BigFastFood because McDonalds bundles hamburgers, fries and a drink...
If it can generate a LOT of money and thus realise shareholder value, but if it simply moves cost around the table but leaves people no better off, why do it?
And consider the longer term signal: is alphabet so shot, it's divesting asset for cash, and if so.. why now?
Youtube costs close to 2x compared to HBO where I live, just to get rid of the ads. Who came up with that business plan? The big problem with Youtube right now is the death of history. More and more often I seek "Youtube"-content on other sites.
As if Google or other tech companies don't already have non-stop re-orgs, now Economist's armchair executives are proposing even more re-orgs so all the poor army of engineers spend their next year on migrations.
judging by the way 9 times out of 10 the callback url for a google oauth login is to a youtube domain, i'm going to sarcastically assume that this is architecturally impossible
The Economist - I don't know what their actual thinking is behind this, but as usual they should probably rename themselves to The Marxist. On this occasion though, most comments seem to be in agreement against The Economist.
YouTube has become horrible experience practically unwatchable unless you pay for the monthly Premium service. And this is coming from me a person who grew up watching TV stuffed with ads. I can't imagine with young people who never watched TV think of bare non-premium YouTube.
Non-premium YouTube is just an ad machine that happens to show some video content between ads. It used to be the opposite of that.
If I watch a 9-minute clip, I get 2 ads at the top but can skip them after the first 5 seconds of the first ad. And then there's often a 15-second unskippable commercial in the middle. So about 4% ads. Sometimes there's a single first unskippable 15-second ad instead, so about 5% ads. (And the ratio seems roughly the same with shorter videos, as they don't have the ad in the middle and sometimes skip the intro ad altogether when watched in succession.)
While network TV is 8 minutes of ads in a 30 min slot, or 27% ads. So about 5x as much ad time.
If YouTube started implementing unskippable ad segments that were multiple minutes long then there would be a comparison. But in my experience, YouTube is miles better than network TV ever has been in our lifetimes.
That 27% rate would be illegally high in most countries. Not to mention the many places which have high-quality public broadcasters with few or no ads.
That said network TV isn't necessarily a great comparison. For me I'm most likely to compare with YouTube of the past, very similar content, but no ads. Or YouTube with adblock or third-party android apps.
Well the parent commenter was talking about network TV (and basic cable isn't any different) and YouTube is an American company.
So that's great if 27% ad time is illegal in some other countries, but I guess they either make it up with mandatory fees (like in the UK) or have lower budget programming.
