A lot has been written in the past couple of days surrounding the Google purchase of YouTube for $1.65 billion in stock, so I won’t rehash the obvious, but there are a few things about this merger that intrigue me… and I think some are underestimating Google’s long-term strategy in the deal.
Danny Sullivan believes it to be an eyeball & ad revenue grab that has little to do with the mission of the company – to “organize the world’s information”. Others feel that this was a shot across the bow to Microsoft and NewsCorp and lament that Google will be making money on that which is now free. And still others worry that we are back in the dot-com days with a bust around the corner.
I agree Google wanted eyeballs from YouTube. But to pretend it has nothing to do with search and deep results, and is mainly about inserting ads into videos, is shortsighted. Although YouTube doesn’t provide transcripts of videos, they are in heavy negotiations with major content providers to continue to develop their product, and have just announced deals with Sony BMG, Universal Music Group, and CBS. The partnerships are a sliver of the type of integration possible as we continue to explore the limits of 2.0 applications and user-generated content. The recent out-of-the-box online campaign with Saturn shows the potential of the types of targetting and cross-media promotion Google can deliver. Up to this point both Google and YouTube have been respectful of consumers lack of interest in watching a pre-roll ad before their video choice and I find it hard to believe they would abandon their model completely in a rush to make consumers watch ads while searching for relevant information. Much more likely is an integration and expansion of the current AdWords program as well as partnerships and other opportunities for advertisers.
Will there be monetization involved? Surely. Will there be Rich Internet Application integration? Count on it. With the bank of Google behind the efforts, building data rich and context rich video results won’t be an issue. I firmly believe that Google sees video (and audio) as a natural extension of organizing information – information throughout history has typically been an oral tradition… why not capture that essence of how humans communicate within robust search results? It’s a natural fit.
The Google founders are getting serious about integration and simplicity as well. The next few years will most likely see a type of bundling that Microsoft does so well, but with the end results being highly targeted and relevant information accessible from anywhere with an Internet connection.
While there are quite a few worries about business models and revenue generation out there in the 2.0 space, this deal in my opinion removes that concern from YouTube, which had a shaky, and ultimately unsustainable business model (free & with copyright violation concerns), and integrates it with the proven model of Google. A good deal all around for consumers, advertisers, content providers.
Microsoft may be trying to go the niche route, a la Apple vs. MSFT of old, in their foray into the social media space by developing their UGC Xbox game design software along with their Live Space social networking platform, but GooTube will be sure to cause a stir in Redmond. It will be interesting to see if they go the portal route or the software route in their strategy…