Matt Gielen asked what was driving some of the recent deals in the YouTube ecosystem. The short answer is: it’s complicated.

YouTube is a mature yet still growing platform that is really the only/main game in town when it comes to sustained monetization at scale. Despite what the haters have been saying: it’s a revolutionary product/platform that is disruptive (replacing TV) and eating the media world. Netflix is evolutionary, it’s taking the same kind of content you see on TV and making it more user-friendly… but YouTube has redrawn the landscape, be it from who is a celebrity, what is quality, or the ad model (Truview is arguably the most scorched earth policy ever in media, siphoning away ad dollars while starving the competition, which is critical since the reason why most web video ventures have failed is the cost of hosting, bandwidth, delivery while the economics matured). Yet Google has the greatest ad system ever and successfully brought that into the YouTube platform.

Entry vs Consolidation

Sometimes it’s someone recognizing that and seeking to get into the market via acquisition (vs building) or a consolidation effort. Matt also referenced Viacom’s purchase of Pluto. Let’s set aside Pluto as that’s off YouTube, but even there, Viacom has been building up its YouTube capacities directly (Awesomeness) and indirectly (Vidcon). When it comes to the buyers (Moonbug & 2btube), the two deals you referenced were consolidation plays by people / companies respectively with experience on YouTube.

Buyers who are honest with themselves also eventually come to realize the basic fact that whereas initially they didn’t love & embrace YouTube due to the business model, over time their resistance to embrace the platform made them unable to program for it once they realized they had no choice but to be on it.

Product/Market fit, meet Format/Platform fit

Tech folks talk of “Product/Market” fit, I’ve started to use the term “Format/Platform” fit to covey that a format that will work on YouTube may not work on Instagram or FB or Snap… same way that repurposed traditional content won’t work on YouTube unless you package it in some way or offer a tone/style that resonates with the younger audiences (i.e. WatchMojo didn’t simply cut up long form media, we ranked it, showed the specific clips, added a certain editorial tone and it worked, many people tell me they may not actually watch a given show but yet will watch our top 10s about them to know what they’re about – a fascinating insight).

So that’s the buyers. What about the sellers?

Builders vs Flippers

Well, it’s hard to paint them all with one brush, but in general, those who grew successful on YouTube were not driven by money, because there wasn’t any of it early on – which is when they got on. Yes people always discover a successful YouTuber or brand and think it was an overnight success, but today marks our 13 year anniversary launching online, and we’ve been on YouTube for over a decade! Hence the title of my 3rd book: recapping the explosion of YouTube and evolution of web video through the WatchMojo journey: The 10-Year Overnight Success.

MCNs could scale quickly, but weren’t sustainable. Channels/brands like Enchufe, Lil Baby Bum & WatchMojo are a different beast: organic growth, deep engagement, and highly profitable. Or are they? Unlike WatchMojo, Enchufe was a LatAm brand where CPMs are low, while Lil Baby Bum’s kid-centric programming makes advertising altogether elusive… so perhaps that is why they were eager to sell.

Meanwhile, because most venture-backed startups (outside of MCNs) and big media corporations shunned YouTube early on (they didn’t want to give up half the revenue or sales rights), a lot of the more successful YouTube channels have generated profits because – hello microeconomics 101 – we didn’t have to worry about hosting, bandwidth, or sales costs. The irony is rich, but is a reminder that those who chase near term profits tend to go broke because others will also chase those near term profits which evaporate as new players enter the market (that’s a bit of macro economics).

Thus, many successful YouTube are fiercely independent and have a very different world view. If you are truly an individual (or small team around an individual), there’s really nothing to sell, per se. Yes, Phil De Franco sold to Discovery but not sure that ended up well for all parties. Plain and simple, there’s not really a market for YouTubers like Pewdiepie, risk and all.

But Enchufe and Little Baby Bum represent something very different: brands that can go on even if key personnel leave. And, they will eventually, because those people are not really wired to be working in corporations. They also burn out. At WatchMojo, I’m lucky to have a big team and purposely didn’t want to build WatchAsh or AshMojo (who the hell wants that?!), but to say I don’t have anxiety or feel burned out would be lying (more from the usual challenges of entrepreneurship and management & less about personal pressure to publish the next video). So when the next companies shows an interest, you accept the deal – eventually.

Ultimately M&A is a means to an end: to grow & evolve. So some like (I would presume) the folks behind Little Baby Bum are ultimately sellers who ride into the sunset; to me, someone who studied business, wanted to pursue a career in M&A but migrated to media and evolved into a storyteller, I can envision myself being both buyer and seller. On some days, I want to buy 10 things, on others, I’m finally open to selling (while continuing to operate, and keep building)… because an independent future is less about new content and partnerships, but rather budgets, administration, red tape, etc.

I am going to guess that Enchufe and Little Baby Bum have (a bit like us) been in constant “M&A mode” with different levels of intensity: Interest, Intent, Action… but while there were factors driven by Fear or Greed why they balked previously, they got to a point where they just felt that it made more sense to join a larger organization and give that a shot. Entrepreneurship is a paradox: you think you’re independent, but you’re not; at all.

YouTube vs Others

There’s also the plain reality that while YouTube has indeed been a more reliable partner and platform than Facebook, it’s still not ideal to live and die off a platform. I take a zen approach in saying: well, WatchMojo would have never gotten to 75 full-time employees etc. without YouTube, so I can’t enjoy the pros without accepting the cons. But with YouTube now being a hot commodity and driver of audience, revenue and engagement, then it has drawn much more competition.

Yes, the Web has done to cable what cable did to network television, but unlike cable, there’s infinite capacity and unlimited supply of programming. We find ourselves in a sea of clutter, chaos in both content offerings and distribution. It’s a constant state of war: but you are not solely competing with others, the playground you play on is under constant uncertainty, be it regarding copyright (Content ID), advertising (brand safety), or whatever the dart-du-jour is.

If executives are sadists and entrepreneurs are masochists, there’s a certain adrenaline rush to it, but eventually, you realize that those very same deals you turned down weren’t all that bad (of course, you also realize that you would have regretted accepting them; but that’s more about the paradox of entrepreneurship). In booming times, the devil you know is better than the devil you don’t. Nowadays, the grass looks greener on the other side. Why is that?

Fear vs Greed

It’s ultimately emotions driven by Fear, over Greed. But one thing is for sure: Fear is a temporary state, whereas Greed is permanent. So things can change quickly, but if I had to call it one way or another, I think 2019 will be a period of massive consolidation, because there’s so much redundancy and waste in media. The layoffs we see are partly a manifestation of that; but the acquisitions you are seeing are definitely largely a reflection of that.