1.65 billion dollars. Thats how much Google just spent to acquire YouTube.
When it comes to buzz in the blogosphere, this is a perfect storm. People already obsess over Google. People already obsess over YouTube’s traffic/inability to make money. And then came the rumor (first by TechCrunch) – Google was in talks to buy YouTube. Bloggers went nuts. Everyone threw their self-important weight, talking about what a horrible deal this was for Google (whilst a fantastic deal for YouTube). And then it happened. What appears to be a most bizarre marriage finally took place.
I do want to take a moment to pause here and give Michael Arrington (TechCrunch) his deserved kudos. I may not agree with a lot of what he says, but he beat everyone to the punch, including the venerable big boys like the New York Times. I guess he can take some satisfaction in leaving them behind.
When I first saw the deal announced, a range of emotions swirled inside me. Firstly was jealousy. I have to admit – 1.65 billion dollars for a site bleeding money? (and without a real plan of making some) I would take that any day. Then came confusion – why would Google do this? They just placed Google Video on their frontpage – wasn’t this a way of saying ‘we lose?’ Plunking down 1.65 billion dollars for YouTube?! And then finally – enlightenment!
Perhaps not real englightenment, but an understanding that Google may be smarter than all of us
Let me share my zen on why this makes sense for Google:
- Propensity to fight. It is not hard to argue that YouTube owes a lot of its success to copyrighted videos. SNL’s Lazy Sunday was the first big viral splash (I myself saw it first on YouTube). This lead to other massive viral hits. Even at this moment it is easy to go through the site and find TV episodes uploaded part by part. But if there is anyone on the internet who ignores copyright, it has to be Google. Just look at their core search feature of caching. I have no desire to go into the legality of it all, but Google has been sued quite a few times because of it, and Google has swatted them away like flies. The entire ongoing saga of indexing book contents. Again – Google is being sued left and right for infringment. Still, Google ignores them (while charging ahead). In turn, it goes ahead and subpoenas Yahoo and Microsoft. Why not drag the other two into this? Their image search. Their keyword (read: trademark) based advertising. I could go on and on, but Google, if looked upon as a person, has a very headstrong personality. If anyone is prepared for lawsuits, its Google.
- The next frontier: video ads. While Yahoo and MSN may make noise about Oventure and AdCenter respectively, AdWords is the king of textual keyword based ads. Yet a juicy new frontier awaits – video. YouTube did prove one thing – people like viewing videos online. Even taking out all the copyright material out of YouTube, a lot of legitimate videos are quite popular. Instead of waiting around to see if there is market for video (which should command *far higher* prices than text links), Google has opted to take the bull by the horn. While Google may never directly put video ads on its core products, it now has one of the largest inventories of video on the internet. Google.com was a massive testbed for AdWords before it was distributed to publishers small and big. Consider YouTube as a massive testbed for Video AdWords before distributed to publishers small and big. (Note: I do understand that you cannot directly compare text-ad inventory and video-ad inventory, but the analogy serves as a useful example regardless).
- Competitive knowledge. Where Google totally smacks Yahoo and Microsoft around is in data. There is no doubht in my mind that the next stage of search engine algorithms will involve user analysis. Why do you think Google Analytics is free? Because Google loves you? No way – they are tracking user behaviour to find out which sites are quality and which are not. A quick example: two sites (Site A and Site B) rank equally inside the Google algo for keyword ‘blue widgets’. Using analytics, Google knows that Site B gets far more clicks from other sites, and also has 3x the stickyness when compared to Site B. Which site do you think should rank higher?
Yahoo has tried to rectify this lag in user knowledge by acquiring sites like Flickr and Delicious, but only time will tell
if the data will be useful. Quick aside: I make a bold claim here that StumbleUpon will soon be courted by the big three – again, easy insight into what users like (and dislike).Back to the point – who was using Google as one of their primary ad inventory sellers? YouTube. So every single Adsense impression that Google delivered, Google also stored that information on their own servers. Many months later with billions of pageviews served, Google has a mountain of data to analyze. Yahoo and Microsoft? Sorry champs, out of luck. Even without YouTube explicitly providing statistics, Google already knew the most popular videos, the top referrers, and so forth. They have information no one else (including you and I) have access to.
- Liked brand. Internet users may be fickle, but Yahoo, Microsoft, and Ask are all learning a hard lesson in consumer loyalty. All that money they are spending on getting more traffic to their search engines? Talk about failure. YouTube is a brand liked by many many people. Google+YouTube = fanaticism. Yahoo got a lot of goodwill out of purchasing Flickr and Delicious. The jury is still out if that goodwill will translate into money, but it can still be a force to reckon with.
- Defensive move (while sticking it to them). Google continues to jab at Yahoo and Microsoft, and they have nothing to respond with. Microsoft gets Facebook, Google gets MySpace (but take the hype with a grain of salt. Even then, MySpace is still far larger than Facebook). And now this – Google gets YouTube, Microsoft gets a deal with Blinkx. Say it with me – “Blinkx who?”
- Stock. Not a single dollar was directly transferred to YouTube. Considering that Google’s stock is ridiculously high already, why not? While more real than Kevin Rose’s 60 million, the value of the deal could easily decrease quite a bit.
In the end, this deal is about potential. In a worst case situation, the YouTube acquisition is a horrible failure. Lets even say Google blows 2 billion dollars on the site. So what? They make more than that in a year. But the upside? Billions and billions of advertising dollars. And the possibility of pulling the rug from under Yahoo and Microsoft (again) can’t hurt.
Google is crazy. Has anyone ever clicked on Goooogle ads displayed on YouTube? They are never relevant because the videos donât present much text content for the ads to work.
Yes, Google did not have the stats that YouTube did, but Google has all the resources in the world to get the masses. If you look at Google Videos, it seems like Google didnât put all its energy into it. Take a look at Google Video Upload applicationâŠI could code a better application in 30 minutes. I donât understand what went through their head when designing Google Video GUI. It sucks.
I would be all for this deal if Google atleast tried its best to make it out on their own. But they didnât. I love Google, but this is one crazy deal. $1.6 Billion? like, come on.
closed captioning will fix this
I’m a little frightened. I wanted to see google adopt some youtube features, not buy it out straight (if that indeed has happened).
the do no evil mantra is starting to slip. how did microsoft start out? gates buying off DOS…
I don’t think it will happen, but should it… we might want to keep google in check
each per million users:
Today 62,950. 1 wk. Avg. 58,450. 3 mos. Avg. 47,380. 3 mos. Changeup 89%
advertising potential. dumbass
Those are some of the most intelligent comments i have ever read
Fox bought MySpace, not Google.
I never said Google bought MySpace (and Microsoft didn’t buy Facebook). I was referring to the ad deals the two giants in social networking have completed.
Interesting analysis, at least now I feel less confused about this whole deal.
“the do no evil mantra is starting to slip.”
The press release that google released stated that the product will keep its distinct brand identy and the orignal 67 employees would continue to work for YouTube. Doesn’t seem overly evil. Seems more like a partnership between two companys who both have something to gain. I look forward to seeing how this turns out.
“Has anyone ever clicked on Goooogle ads displayed on YouTube? They are never relevant because the videos donât present much text content for the ads to work”
-actually I remember reading a story about google developing software that would dissect keywords from your computer microphone and displaying relevant ads.. could this be used on videos? Maybe.
I think that Google could have gotten more for its buck by purchasing two of the competitors who are valued lower. The Google name would bring visitors to the site regardless, and they could have purchased a combo like Veoh and Revvers or something.
who says you have to click on an ad for it to be viewed. Do you tap on the glass of your TV screen during the comercials? NO, but you saw the ad. Google is about to unvail a whole new “paradigm” in online advertising…
I do not think youtube expenses were that high, and google already had them. They simply got a hold of millions of users, so they can display more ads.
Youtube is one of the most popular video sharing sites
on the net. A year ago, co-founders Chad Hurley and
Steve Chen were in between jobs, a pair of
twentysomething geeks running up big credit card debts
as they tooled around a garage trying to develop an easy way for people to share homemade videos on the Web.
Hurley says, “I do not want to work hard. I want to
live a soft life. I want to sleep for three hours every afternoon and nine hors at night. I do not want to stay awake the whole day so that I can get a few 30 grand at the end of each month. I do not want my talwents to be exploited by a ruthless employer. That is why I choose to live off the net. I am too lazy to try and survive in the real world. That is why I did not bother to hold down a job though my credit card debt soared.
“On the net things are handed to me by Google. The idea of youtube came to me from a dinner party with a half-dozen friends in the geratest city in the world San Francisco. It was January, 2005, and we couldnt figure out a good solution. Sending the clips around by e-mail was a bust: The e-mails kept getting rejected because they were so big. Posting the videos online was a headache, too. So we created a site and put in basic software.
“What I and Steve came up with is a Web site, now
called YouTube, that has become an Internet phenomenon. Show the honey and the bees will flock to it. We worked for about six hours each week for two months designing youtube. We had the idea to create a community around the video.
Once that was done we knew that tons of millions of dollars would just flow into our laps after the Google buyour. We will not have to work hard. In the old economy you have to work really hard for a lousy promotion which might give you a few more grand if your employer is very generous. You have to get up 3early in the morning and run for a few grand. On the net you can become rich without working hard.
“On the net once you have the idea you just sit at home and then magic will happen. That is exactly what happened at Paypal, Skype, MySpace, Facebook. The basic, simple to design software that I and Chen designed allows people to post almost anything they like on YouTube in minutes. People can jack off on porn. Now we are sitting at home retired early after the Google buyout. Content has been handed to us on a silver platter. We do not have to slog hard to create content like a poorly paid online journalist who makes a lousy 450k each year. We do not have to experience daily financial pressure
because our site does not get enough readers. We are not under pressure to meet deadlines. We get up at ten in the morning and consider that to be hard work. We do not have to work for ten llllong years. That is the privilege of those in the old economy. they take the tube to go to work for a bum 350,000 dollar paycheck at the end of the month.
“We have it easy. The reason why we never held a job
for more than a year was because we felt that a rope was attached to out necks. We would have had to stay chained in an office with four walls. It is such a pain to get up in the morning and run for the sake of a few 350 milli grand at the end of the month. The content that we offer is free. That is easy for us to that as we do not have to work to create it. Copyrighted work is there for our users to copy and paste as that
is work which we have the right to copy. Other content
comes from common folk wanting to share stuff.
“Revenues will come from advertising. The net is a
click and eyeballs business. Google understands this. The clicks come from youtube’s milllions of eyeballs that we have not worked for. It is unearned traffic. We do not have to sweat and bleed for it. That is the privilege of poorly paid online journalists. I do not have to worry about losing my job as my content does not get get enough page views. I do not have to take the initiative about my own life. I do not have to discipline myself. I do not have to worry about having a career. The millions of youtube.com visitors will ensure that this will never happen. I can simply focus on trying to build relationships with my tall, tough women friends in San Francisco. We hang out together. We work out together. We sleep in the afternoon together.”
@16 – tell us where you sourced that, where Hurley said that and then Iâll believe it.
Personally, I think what you have written is full of shit for a few reasons.
1) Because I have read about 30 articles where it specifically states that all of the youtube.com founders busted their asses working to pull it together and â6 hours each week for 2 monthsâ means a whopping 48 hours was spent creating Youtube – and that is ABSOLUTE BULLSHIT.
2) If you even knew how to program 1) would be the planning that went into it not the programming so your apparent âarticleâ is full of shit there.
3) A Google Search for some of the article showed nothingâŠâŠâŠexcept this same article posted by you in other places.
4) Stop the bullshit and leave the blokes that created youtube, got rich of youtube and now are still successful – be successful.
Have a cry somewhere else fk face.
Also – FK OFF WANG and stop spamming
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