Since it’s not Thanksgiving in the US, news has been anything but slow today. Google has officially bought YouTube, sending shockwaves throughout the online world. Now, a $1.65 billion USD deal is going to be news-worthy anyday, but what makes this even more remarkable was how fast the Google-YouTube deal went from a rumour to a fact. I’d been hearing rumours of potential YouTube buyers since way back in the summer, but in no way was Google a top prospect.
Some will say that this deal officially marks the beginning of “Bubble 2.0”, since YouTube is not yet profitable. I’m assuming Google has some pretty bright people working for them, so what was their reasoning behind this move? Certainly, $1.65 billion USD isn’t a lot for them, ever since their IPO, but the real concern is YouTube’s high operating costs – serving up all those videos takes up a lot of bandwidth, which in turn translates into large monthly bills.
Cornering the market
However, the major reason behind this move must have been to corner the online video-sharing market. Google Video, launched not long ago, was a direct competitor to YouTube, but it received lukewarm support from the majority, who were already entrenched in YouTube. By grabbing hold of YouTube, Google effectively has a near-monopoly in the video-sharing market. They must have some future plan for how they will profit from these sites, besides just advertising revenue and “getting their name out there”.
Furthermore, operating costs aren’t the only problem they need to think of. Copyright violations are rampant on YouTube, and companies haven’t been afraid to pursue these matters in court – Google will certainly be dealing with more potential lawsuits in the coming months and years over material used in videos shared on their sites.
Overall, I don’t know where I stand on this. On the one hand, this could prove to be a brilliant move if Google can successfully lead its YouTube branch into profitability – if it doesn’t, it will be a hallmark and a defining moment of “Bubble 2.0”.
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TOPIC: google youtube
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2006-10-10 , 00:00 CEST (Brussels, Paris, Rome, Madrid, Stockholm).
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