• by Wayne Friedman , Staff Writer, December 11, 2006

The lottery over big user-generated Web sites now has a simple mathematical formula that will stick in people's minds like Michael Richards' rant: A business that has only existed for a year and a half has come away with a $1.65 billion prize.

This is the price Google paid for YouTube--a tough number to put out of your mind even if you're an executive at a $22 billion, $44 billion, or $54 billion dollar traditional media company.Scratching their collective heads as to why anyone would pay $1.65 billion for a company that is not even two years old, execs at old media titans such as Viacom, CBS Corp. Walt Disney, General Electric, and even News Corp. must be angry as hell.

And, faced with this anger and confusion over UGC, many digital marketing executives had their jobs on the firing line. Just look at all the reshuffling at News Corp., CBS, and MTV Networks. The biggest casualty, of course, has been the firing of Viacom's Tom Freston.

Now comes a report via The Wall Street Journal that media companies are looking to pool their resources under one roof for a YouTube-like service. This means one thing: companies haven't got a clue where all this is headed, but they don't want to leave any stone unturned.

YouTube takes these companies' content--often illegally--and spins it for its own members. These videos can get heckled at, or have eggs thrown at them. Savvy veteran network marketers know that kind of distraction builds buzz, both good and bad.

But how can companies approve such freeform consumer interaction? The answer is, they can't. Developing a joint, self-operating, YouTube-type of site of their own would perhaps help them distance themselves from all copyright concerns.Still, they would need to deal with the other part of the business: trying to monetize those short video clips of people accidentally jumping off backyard trampolines onto their pet dogs.

No matter. Media companies seemingly want context--and that comes in social networking sites such as News Corp.'s My Space, which also can be places for user-generated content. While some networks and movie companies have hooked up to MySpace already, using it as a marketing vehicle to help launch shows and films, they don't want to depend totally on News Corp.

As in any TV business, they want viable marketing alternatives. The problem is, the freeform, sometimes illegal nature of YouTube is exactly what attracts viewers.

What makes the big traditional networks think they can recreate this? It's kind of like what BMG went through when it bought something called Napster a few years ago. And you know how that ended up.