Partnerships can only succeed if both parties are truly aligned. Determining whether that's the case is not as easy as you might think.
In picking prospective partners or potential investors nothing matters more than that the parties' interests be properly aligned. Today there's plenty of fast money to go around, lots of people it would be easy to work with, and plenty of players who would make great partners (on paper, at least).
But if your dreams are different from theirs and your ultimate desires diverge, it's just a matter of time before the venture's wheels get wobbly and the vehicle runs off the road. What's really amazing to me is how quickly the disconnects in these deals can appear, and how obvious, in retrospect, the differences seem to any objective viewer.
If people on both sides want a deal to happen badly, they're often more than willing to ignore the warning signs. Other times, a deal can be critically important to one party but be just another transaction, maybe even a “take it or leave it” experiment, for the other. You don’t want to be on the wrong side of this equation.
It happens at every level. Consider YouTube's recent efforts to expand the content it offers. Hundreds of businesses, thousands of people, and hundreds of millions of dollars were involved, and while not every deal failed, basically YouTube ended up with a bag or two of beans and $300 million dollars' worth of lessons in what not to do.
A lot of these deals fizzled because prospective partners thought they could take a million bucks and just dump pre-existing video into the new streaming services. While crappy content was undoubtedly a contributing factor to many of these failures, the three main reasons things blew up were all about the alignment (or lack thereof) of the parties.
In a nutshell, misalignment affected three critical areas:
1. The parties’ understandings of the scope of their respective commitments and of the duration of those commitments. As obvious as it now seems, building and maintaining a media channel is a process that not only never ends but which requires continuous investment--not simply for marketing but for new production costs as well. To the extent that the "producers" of these new channels thought this through they were applying the traditional network model, where a first season's pilot production is funded by the network and, if the show is successful, the producer looks to the network to fund additional shows. Some of this confusion is completely understandable because both YouTube and others (like Netflix more recently) are comfortable calling themselves content networks even though it's not clear (certainly in YouTube's case) that they understand what that means.
YouTube's perspective was completely different from that of its partners'. YouTube assumed that it would provide each channel with funds sufficient to launch and then it would be up to each channel's producers to obtain follow-on funding as the channel gained traction. In addition, as noted above, while this was serious business for the producers, it was pretty clearly just an experiment for YouTube.
What’s the important lesson? Never confuse a gift horse with a guarantee.
2. The “product” offerings versus the prospective YouTube audiences for them. Not long ago, and unrelated to the YouTube channel initiative, I had the chance to work with four of the most popular "performers" on YouTube. Each act had spent several years developing a loyal subscriber base for karaoke music videos, and they had hundreds of thousands of followers.
These performers weren't media celebrities in any traditional sense, but they were pioneers in the emerging area of "camming," and they were beginning to make a living doing their thing.
What was very clear was that their audiences and followers had absolutely no real interest in celebrity performers, traditional media stars, or entertainers and jocks. They were looking for "real" people generating content that was not too far from the material that they believed (rightly or wrongly) they could produce themselves if they had the time, resources, and inclination. They didn't want polished material, professional production values, or anything else that felt too slick.
So when YouTube launched the channel initiative with far more emphasis on hype than heart, and somewhat cynically selected performer/producers who they believed had fans who would follow them anywhere, they miscalculated badly. They didn't understand that the attraction, connection, and engagement mechanisms that mattered most weren't the songs or the sounds but the apparent accessibility of the talent and the shared social aspects of the group self-organizing around these performers as a connected community.
The lesson here is about listening. There are plenty of ways and lots of tools that can help you listen effectively to your customers and develop offerings consistent with their interests and appetites. Launching new products and services in a vacuum, and then using celebrities and big marketing budgets to force-feed them to users who are already drowning in better choices, is the worst kind of arrogance and stupidity.
3. The timing and scale of the initiative versus the adoption culture of YouTube audiences. You would think that one thing Google/YouTube would understand is the adoption/abandonment behavior of active users on their sites. Another thing would be the law of averages and the unlikelihood that, out of 100 newly created anythings, more than a very few would ever become viable channels. And a third thing would be that even the most committed and dedicated user/viewer has a finite amount of time to consume media. Notwithstanding all these factors, these guys went ahead and basically launched everything at once.
Consistent growth and sustained engagement on YouTube is absolutely a function of user acceptance and the passage of time. Audiences build slowly, and only if the content is consistently good. While it is true that certain individual videos (for reasons no one can explain) go viral and, in a relatively short time, get millions of views, these are the exceptions, not the rule.
But, instead of adopting some type of sensibly paced roll-out, the YouTube channels initiative tried to blow out all of the new content (basically a "spray and pray" approach). As a result, more than 90 percent of the channels failed to find any sizeable, sustainable audience.
What’s the lesson? Apart from the utter lack of awareness and respect for the way their users operate, and the sheer presumption that they either knew or could dictate what users would like to see, they basically spent almost a year trying to push a rope. They tried to convince an over-served and essentially uninterested universe of viewers to change their basic consumption patterns overnight, and to seek out and at least sample multiple instances of untested, unproven content.
There’s only one explanation for why anyone would buy into this venture. It’s the same classic observation made by screenwriter William Goldman about Hollywood's inability to produce consistently good movies: "Nobody knows anything." Some things never change.
HOWARD A. TULLMAN is the CEO of 1871 – Where Digital Startups Get Their Start and the General Managing Partner of G2T3V, LLC and of Chicago High Tech Investment Partners. He is a member of the Chicago NEXT & Cultural Affairs Councils and the Illinois Innovation & Arts Councils; an adjunct professor at Kellogg; and an advisor to many start-ups. He is the former Chairman and CEO of Tribeca Flashpoint Media Arts Academy. Over the last 45 years, he has successfully founded more than a dozen high-tech companies. @tullman