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October 10, 2006

Google Buys YouTube

Well, rumor turned out to be relatively true as Google in fact purchased YouTube for $1.65 billion.  There are several news threads on the deal.  There is the issue of the purchase price (a lot compared to News Corp. and MySpace) jacking up the price for future acquisitions.  Will Yahoo buy Facebook, as rumored, and what will be the going rate as companies look to add social networking sites to their roster.  And what will old media do to get into the new markets?

Several stories mention the copyright time bomb that is unauthorized uploads of copyrighted material.  Sure, but Google's and YouTube's separate policies were to delete copyrighted material as discovered.  The question really is how pro-active Google's management will be to look for unauthorized material.  On the other hand, just before the Google deal was announced, YouTube struck deals with Universal, Warner Brothers, Sony, and others to stream copyrighted videos.  Copyright issues, it seems, are solvable.

Then there is the most intriguing issue, how will Google make money off the deal.  Mark Cuban, owner of the Dallas Mavericks and a maverick owner of Internet properties famously said that anyone who would by YouTube is a moron.  Aside from the deep pockets of any new owner in a copyright suit, how could anyone make money at the site.  Analysts have made the same argument. 

Google will link YouTube in its ad system, thus making dollars that 78 million viewers bring with their eyeballs.  Could Google also think about selling videos through YouTube, a la iTunes?  Or the soon to be Zune store?  Could it mail order DVD's such as Amazon?  Or even partner with original video creators and sell videos and split the fees? 

One thing Google has going for it that a number of other property owners don't have is a thriving business that hooks into YouTube as a destination.  Would you buy something from YouTube, or a Google owned YouTube through Google Checkout.  Someone in the executive suites must have thought this out before the purchase was actually made.  It can't be a matter of we have to do this before Yahoo or Microsoft does.  Now that Google has YouTube, let's see what they do with it.

See stories in ABC News, the Houston Chronicle, PC World, eWeek, and CNET News.

October 10, 2006 | Permalink


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