Google Acquires YouTube

This is hot off the press, I am listening to the conference call press release as I write this. It was announced today that Google has indeed acquired YouTube.

It has been reported that once finalised YouTube will retain it’s unique brand identity. YouTube will continue to be based in San Bruno, CA, and all YouTube employees will remain with the company. There is a lot of talk in the conference call press release about the advertising potential of YouTube and the reach of the YouTube brand.

Eric Schmidt, Chief Executive Officer of Google:

“The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,”

and

“Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.”

Chad Hurley, CEO and Co-Founder of YouTube:

“Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners…”

This was a stock deal and the final number of Google shares that will be distributed is yet to be finalised.

“The number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition.”

Also announced are new relationships with big brands like SONY, Universal and CBS along with existing deals with the likes of Warner. The aim is that these partners will be to track their content with digital fingerprinting and taging. We have been advised to expect keyword and content searches within one month. As to how these partners will be involved with YouTube was not disclosed. I also thought it ironic considering Universal’s opinion of YouTube.

“…Universal Music Group has taken a rather dim view of YouTube’s activities. CEO Doug Morris has painted YouTube and MySpace with the copyright-infringer brush, saying that they “owe us millions of dollars” for infringement.”

Perhaps they are going to make it up to them, a sweetener perhaps?

Integration of powerful searching within YouTube is touted as one of the benefits of a relationship of YouTube and Google. This was repeated numerous times in the press release conference call and it appears that it will be one of the priorities in the development of YouTube.

Google’s response as to why they have acquired YouTube when they already have video: Google video is doing very well and maintains good partnerships, volume and content that will be enhanced with YouTube. Added was the fact that YouTube offered a more social community that was being done in a way that was unique and open to further development. This hints that it may come to pas that YouTube content will be available on Google Video. The attraction of the social aspect of YouTube is one that certainly appeals to Google as they have executed social networking quite poorly in the past.

In the last twenty four hours the two parties have formed a long list of potential integrated changes, these ideas were not made public. However, advertising systems and the expertise that Google will bring to the deal in this regard was mentioned repeatedly. Google’s advertising platform would create a new model for content delivery and that video offered an excellent opportunity for advertisers. It was clarified that much experimentation is required in regards to advertising strategies and making YouTube a profitable business. Don’t look now but this clearly states that we can expect the advertising to be far more aggressive on YouTube with this acquisition that previously. But will Google do it right? Time will tell.

When asked where is the bulk of profit was expected to come from after the deal has been finalised: No comment.

When asked what the expected revenue share or outlook as to partners benefiting from the deal: No comment.

When asked as to the valuation of the deal: No comment.

Copyright came up only once during the press conference. It was asked what influence copyright had on the acquisition for Google. The stock standard answer was regurgitated from both parties. That they respect the rights holders rights and they will focus on it with the added resources that Google brings, working with content owners to protect their work. Nothing further. They also “protected” both Google video and YouTube under the Digital Millennium Copyright Act. The act is a large document but they are referring to the section that protects them as hosts of user submitted material. That means that the business or host of the material is not liable but the infringer of copyright is, that is the person that put it there. This response seems to suggest that the status quo will remain and that content will not be torn down. Having said that, if it was taken down I doubt that there would be much left.

It is reported by Google that the deal will close within this fourth quarter as all approvals have been meet and there is nothing preventing the deal going through.

YouTube has long said that it is not up for sale and that they are not in talks, when questioned about this they responded by saying that they wanted YouTube to remain independent and develop it to be better for users in the way that they wanted. Google they believe and the structure of this deal will enable them to “…sharpen focus”, and the combined experience and resources of Google would give them what they needed to accomplish this goal.

When asked about the integration of Google with YouTube they responded very strongly that the brand “YouTube” would remain as it was a known brand that brought with it power and strength. It was this that added value to the community, users, and advertisers, said Google. I suggest you to add to that advertising potential and with it money.

In closing I was taken by the phrase referring to the deal that this was:

“…next step in the evolution of the Internet.”

It might be Google’s next step and at this time both parties are quite excited about the potential. But with the rather large stick that Google wields, I would suggest that YouTube has changed forever in ways that only time will tell. according to the press release, expect something within the next month. But it might not all be good.

Advertisement

YouTube Closer to a Sustainable Business Model?

The Blogosphere has been flooded over the past twenty-four hours about YouTube and a deal with Warner Music Group Corp. In their quest to host music videos (they aim to host every single one in the history of music videos!) you will now see thousands of music videos from Warners available for viewing on YouTube.

The biggest deal in the whole thing is the fact that this copyrighted material from Warners that is featured on YouTube will be made available for users to mix into their own videos. Legally! (not sure if that includes downloading the tracks or what or how). This is stark contrast to previous accusations regarding copyright violations and YouTube. As even days ago Universal was ranting:

Universal Music Group CEO Doug Morris signaled the industry’s exasperation with YouTube just a few days ago when he indicated the world’s largest record label is prepared to sue the site unless it does a better job of preventing copyright violations.

[Via Yahoo News]

The deal sees both companies sharing revenue generated from advertising. Otherwise the details of the deal have not been made public.

I have been saying for quite some time that YouTube in it’s current state is not viable long term. This is mainly due to the excessive cost of the bandwidth that they chug through every day. Their bandwidth bill every month is in the millions. You can not keep up that kind of expenditure and remain on-line! Until the deal with Warner, the company has survived on $11.5 million in venture capital, which I am sure is starting to run a little low. As far as the latest deal we don’t know who is paying who or what. But are they closer to a working business model?

Sure, YouTube will be the place to go to check out the latest music video and perhaps download it. Sure, that is great for YouTube as far as traffic, and it is even greater for Warner who have pimped their latest big hit. People go out and buy the album. But that leaves YouTube as an advertiser for Warner, if they are doing that for free they are nuts. So perhaps they are getting payed for the exposure that Warner are getting. Again, all speculation as we have no idea what the deal entails.

What it does show though is that existing companies are starting to see the power of the online community and that is where the future lies. They are starting to take seriously the exposure and the need to embrace the technology. This from Warner:

“Technology is changing entertainment, and Warner Music is embracing that innovation…”

“Consumer-empowering destinations like YouTube have created a two-way dialogue that will transform entertainment and media forever.”

See they are getting smarter. Perhaps we will start to see issues regarding DRM coming to the surface around this deal as well. Be good to see the debate hot up as clearly Warner see that DRM is useless there are always hacks for DRM and for the rest it is annoying, restrictive and flawed, but that is another story.

This increased trust in on-line companies could well pave the way for others and is sure to benefit the on-line communities and start-ups that proliferate the Internet. I wish YouTube all the best in their latest deal and hope that it succeeds, if only for the benefits that will permeate to the rest of us.