Search supremo Google has, as widely rumored, acquired YouTube for a none too shabby $1.65 billion. Where the speculation was wrong, it would seem, is that YouTube will not get gobbled up under the Google brand, and will continue to operate independently for all intents and purposes, retaining the YouTube name and not becoming GoogleTube (thank goodness!)
Considering that YouTube has only been in business since February 2005, that deal must go down as one of the most incredible yet in a long line of incredible Internet success stories. Of course, the phenomenal following it has achieved in that time, currently in the region of 100 million video views every single day and growing, cannot be ignored. But then, neither can the copyright implications of the service with many videos being published flouting copyright and licensing laws. And then there is the small problem of unlawful, violent, racist and disturbing content which increasingly exposes YouTube to both media and political scrutiny. Not that this has worried Google, it appears, which has hinted that the acquisition may be just the first in a new strategy to get a grip on the evolving Internet video revolution. The Google CEO has gone on record talking enthusiastically about the ‘new and interesting global media platform’ the acquisition will create, and certainly it makes a lot more sense when you think of Google in terms of global advertising conglomerate rather than simple web search engine. And be in no doubt, that is what Google has become.
The fact that Microsoft has been making it clear that it wants a bigger slice of the Google-like online advertising space, not to mention the video-sharing one with the recent announcement of the web-based ‘Soapbox’ service may just have been the catalyst for Google to act now. Yet that still does not mean that YouTube is actually worth $1.65 billion, and any of us old enough to recall the first rise and fall of the idiot Internet business model, better known as the dotcom bubble which burst spectacularly, are likely to be thinking that it is all happening once again. YouTube may be on the up, it may be an exciting young company, but what it is lacking is revenue. Google will not be too worried about this, it has seen share price increase by enough (2%) just off the back of the rumors about the acquisition to cover the cost of the purchase itself. And there’s nothing new in the world of business when it comes to buying your competitors, and that is what YouTube is in the brave new world of web based video sharing. Google has tried to make an impact, and failed. With YouTube commanding something like 50% of that market, and Google only 10%, the deal starts to make perfect sense. I doubt that Chad Hurley and Steve Chen, founders of YouTube, will be too worried about getting into bed with Google, as they will both become very rich young men indeed. So perhaps this is a win-win after all: Google get to monetize content more effectively and do away with one of the biggest competitors in one fell swoop, YouTube get all the resources needed to keep on doing what it has been doing so well for 18 months.
The only losers are those amongst us who worry about the unstoppable rise of a new advertising giant and the possible privacy implications it brings with us in this increasingly interconnected world…