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"Postmodernism is a change-or-be-changed world. The word is out: Reinvent
yourself for the 21st century or die! Some would rather die than change."
Leonard Sweet, cultural historian.

10/09/2006 Entry: "Broadcasting loses in the Google/YouTube deal"

So YouTube has merged with Google to become YoogleTube (I made that up). It's the biggest event since Rupert bought MySpace, and he got the better deal.

There's going to be a TON of analysis on this over the next few days, but here's what a few interested observers are saying today:

Cory Bergman of Lost Remote:

How it is that Apple and now Google have become the destinations and marketplaces for video on the web? They're the new networks using the same currency — video — as TV has for years. It’s because they've not been constrained by old media thinking...

...While traditional media scrambles to protect and incrementally improve its bottom line, companies like YouTube, Google and Apple are pursuing new opportunities focused on the user. And that’s what sets them apart.

Michael Arrington at TechCrunch raises interesting issues about how Rupert Murdoch could upset the YoogleTube juggernaut:
Fox is in a very unique position vis-à-vis this deal. News Corp chief operating officer Peter Chernin recently told investors that 60-70% of YouTube traffic comes from MySpace. While direct integration with Google could certainly make up for part of this traffic were MySpace to shut off YouTube access, it would still be a huge blow. And Fox is also the owner of much of the copyrighted material contained on YouTube.

Google is in a precarious position. Fox could, subject to the terms of their agreement with Google, take their search business to Yahoo or Microsoft, who would be eager to take the deal. They could bury YouTube in copyright litigation which at the very least would require YouTube to pull down Fox content. And finally, MySpace could flip a switch and kill much of YouTube’s current traffic.

New Media economic guru Umair Haque at BubbleGeneration had stated earlier that Google shouldn't buy YouTube and offers some possible reasons why Google couldn't pass it up:
Why did Google buy YouTube?

1) Google has to amplify (and protect) it's key revenue stream - ppc (pay-per-click). Video ppc is a higher value domain, and a hugely untapped one.

2) Google wants assets at the edges of the value chain which can exert market power against 1.0 publishers - just like it's doing in book search.

The more of these assets it has across media markets, the greater economies of scope it can ultimately realize; the flipside of these scope economies is, of course, the more market power it can exert.

In other words, Google's goal is to redesign a more efficient value chain.

3) Google Video failed miserably.

Umair notes that the bottom line is a simple question: Do "you believe tomorrow's attention is worth 10-20x today's revenues? Google does - and that in itself is a data point that beancounters across industries will be chewing on for quite a while to come."

Steve Rubel is happy for everybody, while rolling his eyes at the same time.

Maybe now we can all stop focusing on minutia M&A stuff and focus on bigger, meatier issues like where social media is all going and what it means. I am reluctant to even link to this because it's been written about to death. It's a deal. Now it's done. Woo hoo. Good for Google. Good for YouTube. Great for social media. Even better for the blogosphere because we won't be talking about this much longer.
Folks, this is a very big deal, no matter how you look at it. It gives Google a big footprint inside the social media tent, something it hasn't been able to do on its own. I think that's significant, because the months ahead are going to be about redefining community -- something that's at the top of my list for 2007 predictions.

To local broadcasters -- those people, as Cory mentioned above, who USED to own the video niche -- it means getting pushed further down the value chain, to the expensive "content creator only" position. Local stations are still too busy trying to beat each other in the "real world" to see that forcing people to their own portal was never a good consumer choice for viewing video. Why should I, after all, visit four or five websites to view the day's news? And absent a single local platform for viewing all local videos, people will continue to use YouTube and a hundred clones. And so it goes...

I think broadcasting took a(nother) big hit today.

Replies: 2 comments

i've read more than one comment which suggests there are those who feel the only way this deal was done at that price was because of google's "outrageous" share value.

with media stocks of all stripes bouncing around 52 week lows, maybe it's time to quit doing things on the cheap.

but it does explain that line of thinking.

Posted by thedetroitchannel @ 10/10/2006 07:39 AM CST

hmmm...I came up with GooTube...

more importantly, it brings up the issue of who's going to control social media and, then, access to community (which we've really taken for granted as being free and open at the moment.)

Posted by tish grier @ 10/10/2006 01:40 PM CST


"The future is not something we enter. The future is something we create."
Leonard Sweet