Tuesday, October 10, 2006

Google World Domination Watch Part 19

So you may have heard, Google bought YouTube. I took a half day to figure out what this might mean for Google and why they went and dropped $1.6 billion on something they already have. My conclusion? Of all the articles I read, the head of Microsoft said it best:

“If you believe it’s the future of television, it’s clearly worth $1.6 billion,” Steven A. Ballmer, Microsoft’s chief executive, said of YouTube. “If you believe something else, you could write down maybe it’s not worth much at all.”
In the short term, Google is going to make money by the contextual ads you'll see next to the videos. In the long term, their clout is going to bring in authorized TV and movie content (they already scored music videos & check out this interview). It's tough to imagine a way for Google to squeeze their way into the action in television or movies. As it is now, you're just not going to see a Google channel on broadcast TV. So with the acquisition of YouTube, they're correctly betting that eyeballs will shift from TV viewing to web-based viewing. Once the eyeballs are in their domain, they'll rack in the ad revenue.

If you'll notice, I ignored the contribution of consumer videos to any significant future revenue. Don't get me wrong, I love the consumer stuff but at the end of the day, it's not going to replace professionally-produced content. (Popular YouTube videos get a couple hundred thousand views, laughable compared to network TV.) The real shift in online videos will take place when the latter becomes available and enjoyable online. Most of us still refuse to sit still for longer than 2 minutes with an online video but eventually, someone will figure out a formula that'll work (lonelygirl?).

This is new territory for Google but it's fitting on a day when we're supposed to celebrate exploration and conquest.

1 comment:

Shadow said...

It is pretty sad how much TV losing viewers not that they have started watching TV and things on You Tube and more. I still watch the classic TV, and if I miss it, I don't go watch it online like these people nowdays. Google is making too much money off these ads, but I have to hand it to them, they know where to advertise. Good News. ;)