Let's face it, at this point you've heard of YouTube. It became an internet phenomena overnight. I mean, who doesnt love the idea? Sharing any video you want online for free with an unlimited audience? Genius. Ok, so 90% of the content (made up number) is infringing copyright, big deal. YouTube changed the internet, and we all know it. The real question is, has Google changed YouTube? They've already changed the internet once. Will this change it again?
Google paid an astronomical sum for this little website. What in the world made YouTube worth 1.6 billion dollars? The short answer is "nothing" but dont worry, we'll dive into that in more detail. YouTube has eyeballs. It has far more eyeballs, for example, than Google's own video offering. Google makes money off advertising, which needs eyeballs, so at least this makes a little sense. The real key lies elsewhere. Why does YouTube get so many hits? Easy - it's "illegal" content. Bear with me folks, this might get a bit confusing from here.
YouTube's claim to fame was simple: you could get just about any video you wanted on this website. What else could attract so many people? However, they also didnt really make any money off of it. Thankfully, this seemed to have kept anyone from suing them - you cant really get blood from a turnip, after all. The situation couldnt last, but it worked. This was best demonstrated by the various Comedy Central shows and clips that were available. The Colbert Report, in particular, seemed to benefit from YouTube's questionable content. In fact, the show itself mentioned YouTube on multiple occasions. Anime, home videos, you name it - it was there. Plus, you could embed any video you wanted in a website. This meant, with the proliferation of MySpace, that a video posted on YouTube could get even more viewers - even the silliest of home movies had a potential audience of millions.
Google did the only thing they could do to compete: they bought it out. The real question is: was it worth the rather hefty pricetag? First, the issues. Google is going to try to make a profit off of this purchase. This means that copyrighted material opens them up to lawsuits. Google has deep pockets, so they make a very attractive target. Thanks to this, they have to start policing the site. Copyrighted content is getting pulled left and right. But without this content, would YouTube still have the draw that made them worth purchasing? Sure seems like they might be having second thoughts at this point.
Worry not. Google is not stupid, they're just taking a bit of a risk. Remember how I brought up that Comedy Central content that used to be available on the site? Shortly after Google purchased YouTube, it was all pulled. Google worked out a deal with Viacom (the owner of Comedy Central), and now all the content is back online. This is it folks, this is the brilliance that made Google great. If Google can repeat what they did with Viacom, they can really have a moneymaker here. Imagine if similar deals can be made with the other big content providers. Suddenly, YouTube can be THE premier place to watch video content online, legally. How many visits would that drum up? How much ad revenue would that generate? Even assuming (as any sane person would) that a cut of the ad revenue goes back to the providers, Google stands to make an absolute killing here. Sure, they paid 1.6 Billion dollars for this opportunity, but how much do you think they can make here if they do this right? I'd be willing to bet they can make back their initial costs within 18 months, and start making a profit within 2 years.
Did Google overpay for YouTube? I'd say absolutely, and without a doubt. That doesnt make it a bad move. YouTube changed the internet by giving everyone a way to share videos easily online. Google is changing YouTube, and the internet, by showing us all that it's possible to make a profit while doing it - something that seems to be a problem for just about anyone these days. And for those naysayers out there: no, wanting to make a profit doesn't make Google evil, and nothing else they've done here is evil either.