Saturday, October 07, 2006

Google to buy YouTube?

As the battle heats up between the big 3 (Google, Yahoo, MSN) there are rumors that Google will buy YouTube. Although Google owns it's own video service (Google Video), the purchase is probably not about competing with Yahoo video or MSN video.

Such an acqisition would drop Google at the top of the online video heap. In July, about 30.5 million people had visited YouTube. Compare that with the 9.3 million that visited Google Video or the 5.3 million to Yahoo Video (Nielsen/NetRatings).
YouTube users are said to watch over 100 million videos daily. Google has yet to dominate a category outside its core business - online search. Viacom, News Corp., Microsoft and Yahoo are also said to be interested.

One issue that surrounds the acquisition is the infringement of copyrighted material that mostly make up YouTube's material. Google would assume such liability, although analysts suggest that Google's size would give it more clout than YouTube to leverage and negotiate deals.

If Google's acquisition of YouTube were successful, it would merge 2 of the the web's online video providers and give MySpace, the No.1 online video provider, a run for the money. Since the launch of Google Video in Jan 2005, it currently ranks 8th in terms of monthly visitors and unique users.

YouTube, which has yet to earn revenue, has been carrying the cost of hosting the growing number of video clips, as well as bandwidth, estimated to be about $1.5 million per month.

According to eMarketer, the amount spent on advertising at sites like Google Video or YouTube is expected to jump to $2.5 billion by 2010, from $350 million today.

Shares in Google rose US$8.69, or more than two percent, following reports of the acquisition. Such an acquisition would be Google's largest purchase. Industry experts say other prospects include Metacafe, Bolt.com and Internet veteran iFilm.

The eight-year-old company's expansion has been so rapid that it's co-founder Sergey Brin has ordered engineers to stop creating so many new products and to work instead on improving its existing offerings. Internal audits have shown the company has been spending too much time developing more than 50 products are in various stages of development. Focus will be given to its core product, the search engine.

Google is a fascinating, um, monopoly. While continuously churning out new tools from Google labs, they steadily improve their technology such as Mentalplex, a search tool that anticipates your request, or their pagerank algorithm. Somtimes it seems Google venture into other markets that don't always make sense.

It's difficult to truly grasp the magnitude of what Google does. Originally named "Backrub", Google was developed by founders Larry Page and Sergey Brin as a new approach to searching through online documents throughout the web. Considering the rate at which the Web grows, Google is constantly indexing, sorting, and archiving links to be later be recalled when using it's search engine. Which leads to Googles biggest mystery...

To provide relevant search results, Google utilizes what it refers to as page rank, an algorithm (mathematical forumla) to determine what sites take top positions within the search results pages.

Just look at some of the companies Google has bought over the past few years;

Keyhole - now Google Earth
Dodgeball - connect with friend by mobile phones
ZipDash - mobile maps
Deja - now Google Groups
Blogger - heard of it?
Writely - web word processor
Applied Semantics - info retrieval organization/management
Urchin - Now Google analytics
SketchUp - 3D software
Picasa - photography
Measure Map - blog analytics
dMarc - radio advertising (?)
Reqwireless - WAP browser/wireless productivity apps
Kaltix - search technology
Dulance - shopping search engine (probably used for Froogle
Neotonic Software - email customer support
Android - mobile phone software
Akwan - seach technologies
Where 2 Technologies - internet mapping
Ignite Logic - interesting purchase that allows design of turn key legal sites
Sprinks - paid listings network which allowed the Adsense network grow significantly
Outride - data mining and relevant search technology
Neven Vision -biometric identification - the technology will allow better organization and search of photos using Picasa.

And Google's most recent purchase? The Google garage, where it all started.

One might ask does it make sense for Google to purchase Youtube? It's hard to figure out what they have in mind with some of their acquisitions, but it stands to reason that such a purchase isn't on a whim. Especially at a reported 1.6 billion!

Whether or not Google buys YouTube, I think one other web property they'll be thinking about is MySpace.

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