Google Confirms YouTube Deal
The news about Google’s plans to acquire YouTube has proven true. Google has just announced that it will acquire YouTube in a stock-swap deal worth US$ 1.65 Billion.
MOUNTAIN VIEW, Calif., October 9, 2006 - Google Inc. (NASDAQ: GOOG) announced today that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community.
Offhand, I see the deal benefitting both parties this way: Google gets YouTube’s userbase and community (along with the market data YouTube has gathered so far and continues to do so), and YouTube gets better accesss to revenue streams from advertising.
ForeverGeek has a post detailing interesting opinions on why this deal makes sense. The post basically reasons that acquiring YouTube is one way Google sets itself ahead of the pack. Video advertising is expected to be the next best thing, and Google is already positioning itself as the leader, when its competitors (Yahoo!, MSN, etc.) are still starting to fiddle with contextual text-ads.
Also, it’s the YouTube brand that’s likely to be the most important aspect of the acquisition. YouTube already has excellent mindshare, and Google knows that this is just what makes a successful web application. With the large community already revolving around YouTube, Google can expect tons of market data. Everything else is just icing on the cake.
If this turns out to be a synergy–where the acquisition will produce more value for the larger entity, as opposed to each running on its own–then good. If it fails, it probably won’t make much of a dent on Google’s bottomline. $ 1.65 Billion is just a small amount considering Google’s performance so far and earning potential. And no cash changed hands, after all. It’s a stock-swap!
Implications to television
I’m a fan of Web videos because it’s one form of video-on-demand. I get to do searches on videos and watch them when and where I want to. Admittedly, I do watch some show episodes on YouTube, and the very presence of those videos is against the site’s terms of service, because they are copyrighted material.
With Google entering the picture, there had been speculations that YouTube will be facing lawsuits left and right because they will now start earning revenues off other people’s copyrighted material–this is no longer within fair use principles. But with Google on the business side, it might be able to strike a compromise. Why not do what the television networks are doing? Why not show advertisements (text ads, and even video ads) along with the freely-viewable videos, and give the copyright owners a cut? In my opinion, pay video is bad in that it limits the viewership, and does not satisfy the audience, because of low quality of Web-videos.
As for the traditional television routes (free TV, cable, PVRs), this could spell trouble. Google is known to own tons of dark fibre running across the entire United States (the company has been buying defunct ISPs and broadband providers). Once it decides to start using these to boost bandwidth across the country, then Google could just be creating the next big multimedia network since TV was invented.
Google Interested in Acquiring YouTube
Search giant Google is reportedly interest in acquiring popular video-sharing site YouTube, according to a report by CNN. Google and YouTube are in discussions, but would not disclose any details for now.
Recall that Google already has its own Web video service, Google Video, developing its own format along with content available for-pay. Google has even gone to the extent of incorporating video advertisements on its Adsense publisher program.
However, if estimates are correct, YouTube gets 100 million video views per day, and that makes it the largest video sharing site online.
One very pressing issue, however is copyright. YouTube has been criticized for its users uploading copyrighted content. While this is against the YouTube terms of service, it has become very difficult to enforce. And most copyright holders (TV and movie studios, for instance) have become lenient, presumably because YouTube helps spread the popularity of their content, and since YouTube still does not have a compelling business model to date.
But once Google–or any other larger company, for that matter–decides to acquire YouTube and put up a clear business model for the content online, then copyright holders are sure to protest (and sue).
New Revenue Models for YouTube
YouTube is exploring a new revenue model with Brand Channels, which are basically like just every other YouTube account publishing amateur videos, but this time the intent is to push products. In this case, the initial run will be a deal with Warner Bros. Records, which will promote Paris Hilton’s latest album thru videos of the model-turned-singer.
Beginning Tuesday, YouTube will roll out its first Brand Channel, where Warner Bros. Records will promote Paris Hilton’s debut album, “Paris.”
Brand Channels are much like the channels created for all YouTube users who upload their homemade videos to the site, though the purpose of a Brand Channel is to sell a product rather than to simply promote one’s ability to attract an audience for their work.
The Brand Channels will be financed by sponsors. In this case, the Paris Hilton album videos will be sponsored by Fox.
Another revenue generating scheme that YouTube is embarking upon is Participatory Video Advertising or PVAs. These are video commercials that, just like any other video on YouTube, members can rate, comment on, and embed on their websites or blogs as they please. This is a win-win situation both for YouTube, the advertisers, and the site’s userbase. YouTube gets advertising revenues, while in turn the advertisers get direct feedback from users (and perhaps it’s not as expensive as buying a 30-second slot on traditional air TV). The users, meanwhile, get to provide their feedback on the ads, and they can bookmark favorite ads as they please (considering there are quite a lot of adverts that are entertaining and interesting).
Paris will sure make the YouTube experience interesting.
Youth Prefer the Internet
A survey by British media and telecommunications regulator Ofcom has determined that young people are increasingly turning towards the Internet for multimedia needs, thus effectively lessening television viewing.
The young are abandoning television and radio in favour of the Internet, a survey has found.
The ‘networked generation’ - those aged 16 to 24 - are increasingly turning to the Internet for entertainment and information, said communications regulator Ofcom.
It found that they spend one hour fewer per day watching television on average than other viewers. And they are shifting away from terrestrial TV, spending only 58 per cent of their viewing time watching the five channels.
With downloadable and streaming content available from popular websites such as YouTube and iTunes, the Internet is making access to hard-to-find, niche, or off-time content easy. Particularly with today’s busy lifestyles, there is a preference for time-shifting. Hence, people–young, active individuals in particular–would rather consume content when and where they want it, not having to wait for television schedules and content with commercials.
This should make those in the broadcast business think of alternative business models, such as pay-per-view via the Internet or ad support in Web video, for instance.
Firefighters in Hot Water for Posting a Prank on YouTube
Be careful about posting pranks on YouTube. For all you know, you might be doing something really stupid (in an illegal way) and the authorities would have proof.
Officials are investigating after a uniformed firefighter was apparently filmed being spun in a tumble dryer.
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The video shows a uniformed man climbing into the industrial drying machine and packing clothes around to cushion himself.
Here’s the actual video on YouTube. I watched it, and it seems pretty funny. And our heroes (firefighters, police officers, and others in the uniformed services) do need to lighten up a bit every now and then. However, these people risk damaging equipment and even hurting themselves, which is quite worrisome from a taxpayer’s perspective.
Is YouTube Finally Overtaking FreeTV?
YouTube reports that it’s getting 100 million video streamings per day. These are mostly “bite-sized” snippets of videos.
Since springing from out of nowhere late last year, YouTube has come to hold the leading position in online video with 29 percent of the U.S. multimedia entertainment market, according to the latest weekly data from Web measurement site Hitwise.
YouTube videos account for 60 percent of all videos watched online, the company said. Videos are delivered free on YouTube and the company is still working on developing advertising and other means of generating revenue to support the business.
Incidentally, during the same period, television viewership seems to have declined.
CBS, ABC, NBC and Fox averaged 20.8 million viewers during the average prime-time minute last week, according to Nielsen Media Research. That sunk below the previous record, set during the last week of July in 2005.
It wasn’t entirely unexpected. By tradition, the week that includes Independence Day has the fewest viewers of the year, or close to it, because rerun season is in full swing and the public is consumed with outdoor activities.
It’s either people are going out more with this summer season, or they’re resorting to alternative sources of entertainment, such as the ‘Net. When YouTube started out last year, I didn’t think it would be as popular as it is now. I thought it would be just another one of those short-lived web apps. Even with Google’s launch of its own video service, YouTube has stood strong. Perhaps it’s the community aspect of the service that made it so popular. According to Forevergeek, YouTube is actually now among the Web’s most popular destinations, even surpassing MySpace.
Is YouTube really worth the $1 billion price tag people are attributing to the video service?
Is Web Video the Future of TV?
CNN reports on the merging of the Internet and TV, and concludes that we’re nearing a point where the preferred mode of distribution for video content would be over the Web–it’s nothing like how it was imagined in the early dot-com days of the 1990’s.
From independent producers like Mondo Media to big media companies like MTV, and even kids who post videos on community sites like YouTube.com, the World Wide Web is becoming a sort of worldwide TV network for audiences seeking offbeat entertainment not shown on mainstream television.
… this new wave of Web video is fueled by the rising number of people with high-speed Internet access which makes video watchable on PCs. Moreover, younger audiences are increasingly accustomed to watching video on PCs and laptops.
I’m personally not too optimistic about this all. I just don’t get why some people are so enthusiastic about being able to view videos on the Web. In reality, it’s really crappy and slow, no matter the speed of your broadband connection or your computer’s processor. And then there’s no really interesting content people would want to watch, unless you’re a techie (think DIGGnation, Digital Life TV, TWiT). It’s like that because there is still no standard means by which video content can be delivered via the Web.
There are early attempts at compressing videos good enough for Internet delivery, such as the .H264 MPEG-4 standard. But until these protocols and standards are finalized, and all video-producing websites adopt the standards, then we’ll be stuck with a hodgepodge of different technologies. This means one website will offer different quality and speeds as compared to another. And most sites just offer crappy Flash or Swf versions of videos at very small resolutions with very low refresh/FPS rates.
As for content distribution, the mainstream media people are still, well, for mainstream media. There isn’t much of a business model from Internet video content, anyway, at this point. Consider that not everyone has broadband access, and that not everyone is keen on watching shows online. We still haven’t hit that sweet spot in the convergence between home entertainment and computing. So people would rather watch videos and shows on their television sets, and not on their computer screens. There’s the cool factor of video-on-demand, of course, but showing crappy 5-minute imagery on your computer would prove to be very uncomfortable. I’m a geek, and I love tech podcasts, but I seldom have the patience to download high-quality video versions (takes half a day in my speeds). What more if I were just your everyday, ordinary person?
To me, the point when the Web has turned into a world-wide TV network is when most of the civilized world already has IPTV set-top-boxes or IPTV-ready television sets, and could just surf for shows or subscribe to shows on their television sets, right in the comfort of their living rooms. Otherwise, we would just be fooling ourselves with overhyped video-on-Web systems that are likely to be unsustainable.
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