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TECH TALK: The Rise of YouTube: Googles Interest (Part 2)

October 11th, 2006 · No Comments

Jason Calacanis thinks a YouTube-Google deal makes perfect sense:

1. Google’s search business makes so much money that they could leave the YouTube service the way it is and make back their $1.6B in 6-7 years just by putting Google search boxes all over the site.

2. Given that Google is also not afraid of taking risk with IP issues–and going to bat in the courts over them. Google is the perfect home for YouTube because Google is excellent at holding the line on what they think is fair use and creating tools for folks to opt-out of their service. For evidence of this check their thumbnail, book-scanning, and news services. They’ve gotten attacked on all of those fronts and they’ve held the line, gone to the courts, all while respecting copyright holders.

3. Since Google is not a big media company–but rather a friend of content companies–they will not take the flames from other media companies over buying the asset. They are the advertising and technology platform company, so the media companies will feel comfortable with them buying YouTube. It’s like a neutral party buying the biggest asset in play.

4. $1.6B is the number going around. Is it worth that number? Probably not, but given that Google has an advertising machine at their disposal their probably the only buyer in the market who could pay that price and have any chance of making it back. Also, by taking out YouTube they will have locked up the three biggest non-Adsense players on the market: AOL, MySpace, and YouTube. Microsoft Adcenter and Yahoo Publisher Network are already facing an uphill battle… these three deals really box them out for a five years to come.

Is YouTube really worth $1.6 billion? Charlene Li, once again:

You betcha. Thats 4 cents per video stream ($1.6B divided by 100 million daily views * 365 days) and its still growing. Another way to think of it is that YouTube has roughly 50 million users (35M in the US according to Nielsen NetRatings, and probably another 15M worldwide) which comes out to $32 per user. Its high, but its also reasonable.

Granted, YouTube is just beginning to monetize its audience, but having access to Googles ber-ad network gives it a huge leg up. But this is where I hope YouTube stays the course in not cluttering up its unique interface with sponsored text ads, or its video experience with pre- and post-roll video ads.

Richard Koman of Silicon Valley Watcher writes:

While YouTube is the brand name in user-created video services, Google Video is one of dozens of also-rans. As the conventional wisdom is that video will be very, very big very soon – and Google has of course the content-based advertising market wrapped up, such a move sounds sensible. But it’s definitely a sea change for Google, which is in the habit of buying lots of very small, beneath-the-radar companies, not brand-name companies.

For YouTube’s founders, who have been moving to monetize their golden goose as quickly as possible – unfortunately with deals to promote Paris Hilton and reality TV – the big pay-off must look a lot more attractive than negotiating the copyright abuse waters and the long road to profits.

Tomorrow: Success Secret


TECH TALK The Rise of YouTube+T

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