According to an MSN Messenger Alert I just received, MSNBC is reporting that Google has indeed bought YouTube for US$1.65B in stock. More details as they come in.
There’s been a lot of speculation lately about a possible Google buyout of Internet video website YouTube for US$1.6B. A lot has been said about the potential value (or lack thereof) of YouTube and its future success (or demise).
But why, exactly, would Google drop one-and-a-half billion dollars on YouTube? After all, Google already operates a similar service, Google Video, complete with money-making functions such as advertising and pay-per-view/download.
What value can YouTube bring to Google?
The first obvious answer is market share. According to some estimates, YouTube serves up 60% of the online video market… more than 100 million videos per day. But you’d think with $1.6B Google can boost their own market share (estimated at 10%).
Content would be the other possible answer, but I don’t think YouTube’s collection of user generated content is worth that much, even if you manage to place advertising on them.
Some people have gone as far as suggesting Google simply needs to invest some of their war chest money and somehow came upon YouTube as an acquisition target. If that’s the case, then let me suggest Google should buy lottery tickets instead.
The rest of the theories revolve around Google buying a YouTube to eliminate competition. While a valid point, Google hasn’t normally resorted to gobbling up competitors, usually preferring to buy companies offering services that complement rather than compete with Google.
So, what does Google see in YouTube?
I like to think Google is a smart company with big plans, so I analyze them with this in mind. Think Big. Think Smart.
Google wants to dominate online video distribution and with it, online video ratings. Without ratings you can’t really sell highly-profitable advertising. And without a majority of distribution market share, you can’t really accurately measure ratings.
Google is allegedly interested in competing with Nielsen in the ratings market and in collaborating with Apple on their upcoming iTV product. I’ve written previously about Google’s potential as a Universal Personal Video Recorder (Tivo on steroids). And just recently Google held a think tank with the top US media executives (YouTube was also present). Something’s definitely cooking.
YouTube offers a quick ticket to this online media distribution empire, because YouTube has the market share but, more importantly, the data.
YouTube has over a year of extensive viewership data, detailing how / where / when and what people like to watch. Make no mistake, this is VERY valuable data. In a country with an estimated 110 million television households, YouTube’s 100 million videos served daily provide a treasure trove of data, ready to be mined, analyzed and monetized.
Buying YouTube would give Google a majority share of the Internet video market, along with the important rating’s data to monetize these videos via Google Ads.
More importantly, owning a majority share of the video market would allow Google to collect and commercialize CREDIBLE ratings data, which it could then share with the major networks and content owners, distribute their videos online, and get a cut of the ad revenue.
The Copyright Issue
A favorite argument of late is that as soon as a big player buys YouTube, said player would be sued into oblivion by copyright holders. While that may hold a grain of truth, YouTube has actively policed the website for copyright violators when alerted by the rightful copyright owner. YouTube has also signed agreements with major players, such as the one recently signed by my good friend Alex Zubillaga of Warner Music, for content distribution and revenue sharing via YouTube.
I believe Google has even better relations with these major players and with credible and comprehensive ratings data to share could easily sign distribution and revenue sharing agreements with them.
The Big Picture
All of this won’t certainly come together over night. Too many loose ends need to be tied, agreements need to be made and signed, and technology needs to be put in place. But I can certainly see a road map outlining the steps ahead for Google.
1. The first stage involves the acquisition of YouTube and its integration into Google Video. Agreements with the major networks and content producers will allow the distribution of videos via Google. Most of these players already distribute their videos online for free, so a bigger potential audience combined with ratings data would certainly be appetizing.
2. Stage two would involve integration with services such as Apple’s iTV, allowing viewers to play downloaded content (along with ads) on their televisions. Google could combine viewing history with search history to further finetune the ads displayed.
3. Stage three would allow viewers to record programs on Google’s servers and watch them at a later time. Additionally Google would have the capacity to allow revenue sharing agreements with local network affiliates, according to the viewer’s geographical location.
Of course all this depends on whether Google is indeed interested in taking a shortcut by buying YouTube. And if YouTube is not yet aware of these ramifications, if I were them, I’d certainly start raising the price.
Comments are always welcome. I’d love to discuss these ideas.
UPDATE: Shortly after writing this article, Google did indeed proceed with the purchase of YouTube for US$1.65 Billion in stock… which I actually think is a bargain. Stay tuned for a post-buyout article.
Cuban, who sold Broadcast.com to Yahoo for several billion dollars back in the dot com era, feels that the potential for lawsuits against a wealthy YouTube owner is too high. He added that “the only reason it hasn’t been sued yet is because there is nobody with big money to sue.”
Though I agree with Cuban about the legal issues surrounding YouTube, I still feel YouTube has a fighting chance.
What I don’t like about YouTube is that since they don’t own a lot of the really good content, any of the big players could simply decide to clone them and keep control of their content. It would certainly cost less than the rumored $1.5Billion YouTube thinks it’s worth. But this doesn’t seem to be the case anyway, as YouTube has been signing distribution deals left and right. Big networks that had at first been put-off by YouTube, have now embraced the easy reach and distribution it has given them. The way I see it, if you can watch a show on TV (or HDTV), you won’t be watching it on YouTube’s poor quality versions. So for big shows (24, Lost, Heroes, etc.), YouTube acts like advertising: you get hooked on YouTube but then watch it on your regular TV/Cable.
As for advertising, Cuban also had harsh words for YouTube, asking advertiser if they really wanted to spend money to reach limited viewers (while at the same time offering opportunities to advertise on his own network, HDNet).
While it’s true that any one video gets fewer viewers than a single television show, it’s also true that it costs much less. What YouTube needs is to leverage their infrastructure to create more flexible advertising schemes.
While no big-time client would like their spots airing on unknown videos, YouTube could certainly create plans for ads to show whenever a video surpases a given number of views. So if a video gets viewed, shared or downloaded more than average, more expensive ads would start showing on them. Additionally YouTube could match certain advertisers with certain shows (so that in a video of Treasure Hunters, you’d still be show ads from MasterCard or Ask.com).
So there are several content distribution and advertising opportunities still to explore on YouTube. It’s up to them to show who the “moron” ultimately is.
So there I was, wide awake in my bed, wondering if the Crestor was keeping me from catching some much needed Zzzzs, when I decided to scramble over to my HP Media Center PC and check what was new on Digg. Over on my number two display, a trusty old 17″ BenQ FP731, my RSS aggregator, KlipFolio, diligently scrolled the latest Digg news. One headline caught my eye:
I clicked and waited mere milliseconds for Digg to pop-up on my primary monitor, an awesome Gateway HD FPD2185W. I read the comments on Digg and quickly had Firefox whisking me away to chartreuse’s Beta blog. As the post came up, I decided a late-nite snack was necessary to accompany this mix of marketing savvy and Paris Hilton photos.
The article is brilliant and shows how Hilton has exploited the attention economy to advance her own career. According to chartreuse, Paris is the queen of links, gratuitously dropping brands, locations and names whenever possible.
Though she hired a publicist to get her on Page 6, she never really talked about herself. She talked about other people. She would mention the designers of her clothes, the club she was going to, who made the sweater for her dog, all without any guarantee of any return. She just threw out links.
It’s gotten to the point where people are using the tactic of rejecting Paris as a marketing tool.
What the article doesn’t go into is how to apply this to your blog (as originally promised in the misleading Digg title). I’m not sure that dropping names on your blog will guarantee you rich marketing campaigns, but everyone knows that cross-linking helps boost where you appear in Google search results. So the best way to do a Paris Hilton on your blog is probably to link to other blogs of interest to your readers or articles and hopefully get some links back in return.
If you pay attention to other bloggers (and your content/banter/mojo is smart), they’ll eventually pay attention to you. Smart comments on popular blogs will also boost your “attentioness” on the Internet. But as usual, the best way is to provide smart, useful content for your readers. Unless you’re Google or Digg or YouTube or Paris and are simply a platform for the sale and promotion of attention.
This article comes to you thanks to WordPress blogs, Dreamhost hosting (use promo code 29OFF for $29 off any hosting plan), the Microsoft Windows XP operating system (at least until I get an Apple MacBook Pro), Sysinternals utilities and the wonderfully elusive CreateShortcut util by Jeff Key.
It’s a simple idea: every Apple Store should have one computer running Windows XP via Parallels Desktop software.
Why? I believe it would help convince wannabe-switchers to take that final step and purchase a Mac.
When the first MacIntels came out, I began seriously thinking about switching from my all XP set-up. Running the Vista Beta simply made the decision easier (it lasted only two weeks on my laptop before I happily went back to XP SP2).
I depend on XP for part of my work, since I do all my software development on Microsoft’s Visual programming languages. The rest of my work revolves around the internet and Web2.0, for which the MacIntels suit me just fine.
But try finding an Apple Store where you can try out Windows… I haven’t received so many funny looks since the day my sister dyed my hair orange while I slept out in the sun.
I eventually stumbled into Apple’s Lincoln Road store on Miami Beach, where XP was being installed on an iMac (via BootCamp). As weird as it may seem, it’s quite reassuring to see XP boot up on these alien machines.
But there’s still this sense of secrecy around XP in the Apple Stores… Parallels Desktop software was unavailable on the shelves (but they had copies out in the back, they said). The next week, they were on display only to misteriously disappear the next day.
Apple needs to understand that running XP can only boost sales of their computers. Ideally, they should have a computer running XP and several important applications that may or may not be available on the Mac platform.
Now I just need to wait for the Core 2 Duo laptops…
More on the web: see “On Getting Closer to a Mac Tipping Point” for additional views on the subject.
This is a follow up to my post: Google’s Flickr Killer.
As I’ve already mentioned, a photo organizing and editing tool that runs on your computer (and not over the web) -such as Picasa- is an integral part of the equation. If I could upload straight from Picasa into Flickr, I would use my Flickr account ten times more than I do now. Since I’m using a beta version of Picasa Web Albums, I can upload directly into Google’s own web-based photo storing and sharing service. But, convenient as it is, it’s still no Flickr (or smugmug or photobucket).
These are some of the features which, in my opinion, will permit Google to turn Picasa Web Albums into the next, best Flickr:
- More storage space. How about unlimited? The current 250MB is laughable, and the only upgrade option is to 6GB.
- Direct linking to images, at several sizes. This would allow users to link to their images from their websites, blogs or forum posts.
- Tags. It should be easier to tag photos within Picasa and these tags should replicate in Picasa Web Albums. Tags make organizing photos easy and fun, and make it much easier to find similar information from other users.
- Geotags. Come on, Google..! Google Maps/Earth + Picasa + AdSense = Why isn’t this happening quicker?
- A powerful API. An API would allow users and companies to offer third-party services, add-ons and tools beyond Google’s imagination or capabilities. Map tools, printing services, backup services, blog galleries, mosaics, games, t-shirts/purses/mugs, avatars… you name it, someone will come up with it.
- Add-supported, revenue-shared. Google could use the AdSense network to advertise on user’s galleries and photos based on the tags used (or use an image-analysis algorithm to extract relevant information from each photo). Beyond a certain number of hits, Google would share the advertising revenue with the photo’s owner (via Google Checkout, of course).
- Comments and notes. Visitors should be able to comment on each photo, ala Flickr.
- RSS feeds. RSS-everything: tags, users, comments…
- Better GMail and Blogger integration. (Currently I can only post four images at a time to Blogger and can’t BCC: on my emails). Ideally, Picasa would allow posting to any blog (WordPress, for instance) the way Flickr does. Publish-by-email would be nice as well (send your photos to a predefined secret email, and have them appear on your photogallery and blog).
- And of course… Google Search for all my images.
The funny thing is, Google has already implemented these ideas in one or many of its services. So, what is taking them so long to tie them together into a killer photo storage and sharing web service?
Do you have more suggestions for Google? Post them in the comments to this article.
And Google, I’m available for hire… in case you want to boost Picasa Web Albums into hyperdrive.
Contact me through this form:
How Google will change the way you experience music, television and media in general.
Google, Google, everywhere
It seems you can find Google just about anywhere these days. Internet search? Check. Satellite mapping? Check. Photos? Check. Online shopping? Check and check. Advertising? Check. Web analytics? Check. Finance? Check. Video? Check. Music and television? Err, not yet, but the battle plans have been drawn.
Google has been quietly getting ready to bring the power of its brand and technology to the way you experience music, television and media in general. A simple search through Googleâ€™s job boards will display several openings for programmers, technicians and project managers for their video-on-demand, set-top box and media integration projects.
From the web to your television
Google has the equipment and expertise necessary to set up a massive media distribution and tracking network, integrated into their existing search and advertising technologies.
With the release of Google Finance, Google has unveiled a simple, information-rich interface that readily lends itself to other areas, such as music and television. Imagine having all of your favorite showâ€™s news, postings, ratings, reviews and episode guides at your fingertips. Create your very own programming guide, including not only your favorite shows, movies and music but also, why not, your favorite ads. Quickly vote on your favorite shows, buy merchandise and share your opinion with other viewers. Itâ€™s all possible in Googleâ€™s universe.
I’ve made a simple mock-up of what Google’s TV dashboard could look like (click on the image to open the full-sized, commented drawing on Flickr):
This dashboard would give the user access to the whole Google Media experience. News about the current show (via Google News), recording (via Google PVR – someday), user comments (via Google Groups), slideshows (via Picasa), scheduling (via Google Calendar), etc. Everything about your favorite shows at your fingertips.
Google is also making inroads into the set-top box business, hoping to bring television straight into your television (whether itâ€™s in your living room or your mobile phone). With the right connections into your home, Google could use their massive disk arrays to create a huge, universal digital video recorder, giving you access to every show on television (or at least to those shows the local networks allow you to watch). There would be no need to be home in time for a show or to remember to schedule your video recorderâ€¦ theyâ€™d all be online, waiting for the correct password or payment to send it your way.
Bringing it all together
There are still some areas where Google lacks the experience to properly pull this off, but they seem to be hard at work at filling most of these voids.
Searching within video and music files (allowing you to search for particular dialogue, images or sounds within audio and video files) and online transactions (allowing you to pay or get paid for buying or experiencing content) are some of the areas Google has been actively working on (though some argue that search within compressed media files is not possible). Others, such as ratings analysis (necessary for tracking a showâ€™s popularity and establishing value) should readily evolve from Googleâ€™s vast experience with search result placement and web analytics.
If successful, Google will offer the viewer an integral, enjoyable and information-rich media experience. Hey, they may even get you to watch the commercials. Not bad for a newcomer.
UPDATE: This article was updated on September 28, 2006 to include the Google Dashboard graphics, which hadn’t been uploaded to the server when the original article was published.
Google has been busy lately acquiring companies (blogger, picasa, keyhole) and developing software (gmail, desktop search). Where’s Google headed with all this and what else do they need to get there?
One common theme across the latest movements from Google (picasa, keyhole, desktop search) is Microsoft Windows. All these programs are Windows-only. Even the GMail notifier developed by Google to let users know when they have new GMail is windows only.
I certainly would’ve expected Google to be more web-centric in their approach to content management and generation tools, but it seems they have their sights on Microsoft’s playground. This certainly requires more thought.
One thing is clear though, judging from Google’s shopping spree: they not only want to “organize the world’s information,” they also want to help you create it. They also want to “make it [the world’s information] universally accessible and useful” which is were these Windows-only acquisitions stop making sense, unless they’re just stepping stones to test the waters.
Keyhole is an interesting purchase. They manage terabytes of geographical information, while Google manages terabytes of content. Play with Keyhole for a couple of hours and you begin to understand how powerful this combination is. Google has already gone into the local-search arena, meaning you can find stuff in your city. Keyhole would let Google map all that stuff (say, all Italian restaurants within 10 blocks of my place) and show you a picture of your neighborhood with the restaurants indicated. Add a recommendation engine and we’re talking business.
You could also tie Picasa with Keyhole and create a map showing where you took some vacation pictures. Add a GPS to the mix if you want to make it even more straightforward. Blogger is already tied into Picasa, so you’ll eventually have some very sophisticated vacation albums (or store locations if you want to see the $ side).
Or open Google News, click on the geolocation icon next to a headline and immediately open a fly-by map of the area in question.
So what’s missing from Google’s master plan?
Well, first of all, an RSS reader – web-based. NewsGator Online and Bloglines come to mind. Connect it to GMail (so you can send stories to your friends and check your email via an RSS feed), Orkut (subscribe to groups as RSS feeds), blogger (post interesting stories to your blog), Google, Desktop Search, etc. The Google RSS reader would, in essence, be the Google Browser. Your window into the world’s information. So i believe Google’s next product (developed or acquired) will be some form of RSS reader, ideally web-based. (That or a GMessenger, 😉 ).
Second, I tend to agree with Technocapitalist, and y: Google should have acquired Flickr. Flickr still needs some work, but as a content generating and organizing system it’s huge. These guys are so cool you can even subscribe to different keywords so you’ll get any new photos posted under that keyword via RSS. I’m not sure why Google went with Picasa, which relies on locally stored photos, instead of something like Flickr which opens your photos to the world (or just your friends and family if you prefer).
If you can, play around with Keyhole for a while -they offer a 7-day trial (btw, wake up guys… 7 days? What happened to 30-day trials?). Be sure to check out the Keyhole BBS to truly understand the power and potential of this application.