Yahoo, Microsoft and AOL are also playing catch-up to YouTube, whose model these large Internet companies are adopting.
Google, Yahoo, Microsoft and AOL need a strong position in this market, due to the increasing popularity of online video. Collectively, traffic to the top 10 video Web sites increased 164 percent between February and May of this year, according to Hitwise. As traffic to online video sites increases, so does the interest of advertisers, who in turn generate most of the revenue for Google, Yahoo, Microsoft and AOL.
For many years, online video remained an unfulfilled promise, hobbled by high broadband prices, inferior image quality and reluctance by TV networks and film companies to put their shows and movies on the Web. However, in the past 18 months, video on the Web has gained momentum, helped by a critical mass of users with broadband access, improved quality and a willingness by production companies to distribute their films and programs online.
The deal clearly would strengthen Googles position in online video, but it might also saddle Google with potential copyright liability issues, said analyst Greg Sterling of Sterling Market Intelligence.
The potential liability for widespread copyright infringement that threatens any online video service that allows people to upload content under copyright is a real threat and Google will have to deal with copyright infringement decisively or it will find itself on the business end of a couple costly lawsuits.
The potential upside for Google is pretty impressive. According to Nosy Snoop:
A purchase of YouTube could give a big boost to the online video efforts of Google. YouTube commanded 46% of visits to U.S. online video sites in August, according to market research firm Hitwise. That compared to a 23% share for the video activities of News Corp.s MySpace social-networking site, and 10% for Google Video.
Basically the net effect of a Google/YouTube union could mean close to 60% of the online video market in Google’s hands. Once this deal is done, the big question will probably be whether the deal was worth the final price, $1.6 billion or otherwise. With all the traffic to the YouTube site, Google could easily monetise the site with AdSense and make even more money so it could well be worth the price. Another question is how this deal could affect Google’s recent deal with MySpace to sell advertising on MySpace.
There are a few people who agree that buying YouTube makes a lot of sense. ShoeMoney has a list of 10 reasons why this deal makes sense. Briefly these reasons are as follows:
- Merging to form the biggest video network
- Land-grab for publisher space
- Block out Microsoft
- Making the 800 LB Gorilla even bigger
- Gotta spend it somewhere
- Why rent when you can own
- Already have the data
- Bandwidth is not a issue
- Legal issues are not issues
- Google needs to stick to what it knows
If this deal goes through, it is really going to have a big impact on the Web space generally. Let’s see what happens!