Update: Google did, in fact, purchase Youtube for 1.65 billion dollars in October of 2006.
Sure, the internet, newspapers, and blogosphere have been buzzing all weekend about the rumor of the possible acquisition of YouTube by Google for $1.6 Billion. And yes, once a large company does acquire YouTube, the end result will more than likely be the headache of copyright lawsuits from all of the content creating studios who are tired of having their works TiVo’d and uploading to YouTube and other online video storage houses almost instantly.
And what better company to handle such legal matters than Google, right? With their experience in copyright law as it pertains to the scanning and uploading of protected materials, one might imagine that Google would acquire YouTube just to keep their legal team busy for the next two or three years.
Why Will Google Buy?
But why, why acquire YouTube? Doesn’t Google already have Google Video? Why not build upon Google Video and wait for someone else to fall into the YouTube acquisition trap?
The reasons why do run a many and are difficult to be pinpointed in one simple statement, so here’s a rundown of reasons Google would pay $1.6 Billion for YouTube.
1) Popularity
YouTube is the 10th most popular online destination according to Alexa and if you don’t trust Alexa information, its also ranked as the third most popular steaming video site by comScore Media Metrix and #1 visited online video site according to Hitwise.
Google Video is no where near the top online video site, at this moment, and hovers among MSN and Yahoo among the other online dinosaur fossils according to the Hitwise rankings:
August Hitwise data reflects the following in terms of rankings (based on share of visits):
* YouTube: 45.46%
* MySpace Videos: 22.99%
* Google Video: 10.25%
* Yahoo! Video: 6.06%
* MSN Video: 5.92%
Additionally, in September, YouTube enjoyed a market share of visits 4 times greater than Google Video.
2) Not making the same mistake twice
Google made a $610 million mistake this year by not acquiring MySpace when they had the chance. Instead News Corp’s Fox Interactive bought MySpace for the bargain price of $580 as MySpace’s parent company was looking to sell fast in order to avoid lawsuits (over spamming, not copyrights).
Then, Google turned around and sunk $900 million into a MySpace advertising deal.
Greg Sterling has more:
Rupert Murdoch famously claimed that Google could have purchased MySpace for half of the $580 million he paid for it but the search engine passed — if he’s to be believed. Assume, however, he’s telling the truth and that Google miscalculated badly in passing on MySpace. They then went on to do the $900 million ad deal with News Corp./Fox.
They wouldn’t have had to make those sorts of pricey commitments had they bought the social networking site for the $290 million and owned all that traffic themselves.
Is Google’s reported pursuit of YouTube then an implied “mea culpa” of sorts and a recognition, informed by hindsight, that the company can’t let another similar opportunity pass?
3) Community
YouTube enjoys a much more active, enthusiastic and loyal following than any video service which has been launched by a search engine company, even more active in terms of uploading and sharing by netizens than Yahoo Video.
With 35 million users in the United States alone, YouTube has proven that the success of online video is based upon sharing, commenting, ranking, embedding and suggestions… in other words; community.
Charlene Li of Forrester Research uses an interesting and simple comparison to understand the differences between the YouTube and Google Video communities.
Compare the Extreme Diet Coke and Mentos Experiment Video on YouTube and Google Video.
The most popular YouTube video of this famous web experiment shows 519,023 views with 931 comments and 2977 ratings.
Google Video serves 363,058 views, 2347 ratings, and possibly about 40 comments.
Take away the fact that about 10 other copies of this same video are available on YouTube which all add up to about 500,000 more views in their own right, but there are two main differences which stick out in the comparison; the amount of users commenting and the suggestions by YouTube for similar user created Diet Coke & Mentos videos.
This search for Diet Coke Mentos on YouTube results in 3051 videos while the same search on Google Video delivers only 631.
YouTube users are using the interface to share, upload and comment on videos. Not just watch them. That’s the difference between users and community, and YouTube has community.
4) Usability & Stickiness
This kind of falls into the classification of popularity, but users like YouTube more than they do Google Video. They stick around and watch more content on YouTube, while at Google Video they don’t seem to stick around quite as long.
Hitwise says that “YouTube’s average session time is double that of Google Video’s, at 18 minutes 33 seconds in the month of September versus 9 minutes 9 seconds for Google Video. YouTube is just plain sticky compared to Google Video.”
5) Advertising and Money
Throw community, popularity, and stickiness to the side for now and let’s get down to the nitty-gritty. Purchasing YouTube at the price of $1.6 Billion would not be a crazy investment for Google.
If YouTube serves 100 million videos a day, that’s 365,000,000,000 a year… or roughly 3.65 cents per video. If anyone can turn a profit off of YouTube, it’s Google and in this case, given the users, popularity, and traction a YouTube buyout would give Google, it would make more sense for the company to obtain 100% of YouTube AdWords revenue than 20% or 30% of it.
Especially with the Google Video Ads program in the works by Google AdWords.
More Reasons? If you would like to add to the reasons Google should purchase YouTube, or argue the acquisition, please feel free to post below.
Featured Image: Deposit Photos
