Inside.com's Jason Calacanis On Why He Turned Down YouTube Funding


Jason Calacanis has a warning for YouTube: your arrogance will be your undoing.

The CEO and founder of Inside.com and a major YouTube content provider told the STREAM conference in Santa Monica Tuesday that Google’s video streaming platform is facing its United Artists moment.

“You’re going to have Chaplin and consortium of people really stick it to YouTube, and I don’t even think YouTube sees it coming,” Calacanis predicted.

He see a competitive rival to YouTube coming rapidly in the form of a Maker Studios, a Twitter, Facebook or a Hulu under new ownership moving onto YouTube’s turf.

Meanwhile, Calacanis is no longer doing business in the YouTube ecosystem.

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“I don’t need YouTube’s money. I have my own money. And I can raise money,” he added, as he talked about leaving the YouTube farm for new opportunities elsewhere.

Inside.com a year ago was given initial funding for premium content production from YouTube, which led to nine original series.

But when YouTube recently returned to renewed its partnership deal with Calacanis, he told the video streaming giant he was walking away from additional financing.

In a blog entry posted Sunday, he argued YouTube is an amazing digital platform to build an audience for content, but it’s not a good business proposition for creators, especially when YouTube typically takes 45 percent off the top as part of a revenue split.

Creators may find an audience for their content on YouTube, but they develop no meaningful relationship with consumers, he argued.

“You don’t own your customers. YouTube does,” Calacanis said, adding publishers have no way to assemble an email list of customers for a feedback loop.

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What’s more, YouTube has no direct sales force to sell ads on video sites, and instead depends on Google, including its AdSense product, to draw in advertisers.

“As a publisher, you have no direct relationship with advertisers,” Calacanis argued.

So his advice to YouTube partner is turn the ads off and do a partnership or series with a brand.

“So Red Bull has no ads, and they do a space jump and it’s one big giant commercial and they pay YouTube nothing and they’re one of the biggest channels,” Calacanis said.

Only by diversifying and taking content to a more advertising-friendly platform where you can control access to audiences and advertisers can content publishers hope to have a chance to break even, much less profit from their business, he added.

And it turns out, that’s exactly what multi-channel content networks like Smosh and Machinima gathered at the Stream conference this week are doing.

“You can feel the frustration of a content creator who has lived on the (YouTube) platform,” said Aaron DeBevoise, executive vp of network programming at Machinima.

DeBevoise, while praising YouTube as an audience-building platform, added content creators know the benefits and opportunities of living off of the YouTube platform.

“It’s ultimately the best marketing platform,” he said, before adding other digital platforms like Hulu and Yahoo! are also exceptional monetization platforms.

Chris Williams, chief development officer at Maker Studios, agreed YouTube had proven itself as a platform on which to make content go viral.

“If you want to build a massive audience, and brand talent and scale, this is a great place to do that,” he told a STREAM panel on multi-channel content networks.

“Once you have that scale, you’re potentially in a place to more widely distribute that content and increase monetization,” he added, while still validating Maker’s presence on YouTube.

Elsewhere, Barry Blumberg, executive vp of Alloy Digital, which represents the Smosh property, agreed it was wise to diversify away from YouTube, where possible.

“We a long time ago realized we didn’t want to be dependent on one source for our revenues,” he said.

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