After days of rumours, and countless convincing arguments from many people as to why it was pure speculation and why they would be mad to do it, Google went and acquired YouTube in a stock-for-stock deal worth approximately US $1.6 billion (or about A $2.2 billion). With that kind of money floating around, I am clearly in the wrong business.
(And is it just me, or is the Web 2.0 business model for so many companies:
- come up with an idea
- attract some hype
- get bought out by Google
- PROFIT!!
Swap out Step 3 with Launch IPO, and you've got the dot.com boom. Or am I just being cynical?)There were many good reasons why this was never going to happen:
- Google had their own video offering, Google Video (surprising name, huh?). Sure, YouTube was more popular with apparently a better user interface (I never saw it myself - they're as bad as each other in my opinion - ugly and confusing - but it may be a different story for people uploading video)
- If YouTube was really serving up 100 million videos daily, it must have been pouring through the bandwidth at an alarming speed. I shudder to think what the burn rate was on any venture capital that had been poured in to YouTube
- YouTube is rife with copyright material. If Google took it over, they would be exposed to potential legal action from copyright owners like the big entertainment conglomerates. There may not have been much point in suing YouTube as who knew if they even had any money. Google, on the other hand, clearly and publicly has very deep pockets
- US $1.6 billion is a hell of a lot of money. Even MySpace only went for US $580 million. This values YouTube at 3 times that
It just didn't seem to make sense, but Google went ahead and did it anyway. Of course, more than anything else, Google has become an advertising company first, search engine second, cool toys for geeks and normal people alike a distant third. Serving 100 million videos a day must translate into a gigantic number of unique hits and pairs of eyeballs, just waiting to be served ads while the latest viral video is streaming to their desktop. I'm sure the advertising potential is mind boggling.
Apparently Google Video and YouTube will remain separate entities. I'm not sure why yet, but perhaps they will serve different markets. I honestly haven't thought this part through yet.
I also don't know if the announcement that Google and
SonyBMG have signed a deal that will see all of
SonyBMG's music video collection available for free on Google Video was before or after the YouTube announcement (they're both dated 9 October 2006). Did Sony sign on because the acquisition of YouTube was in the works, or was it a surprise to them as well? Sony had to have known - otherwise that's a huge thing to keep secret in a deal like this.
Anyway, it's all very interesting. The more the internet seems to move away from traditional entertainment models with Web 2.0, IP TV, podcasts, Creative Commons mashups and the like, the more it seems to be dragged back in to the standard way of things - free content paid for with inescapable advertising.
The more things change...