Yesterday, someone sent me an email about the Google/YouTube deal with the note “seems like an absurd amount of money.” Well, i think it was a good deal for Google. Here’s why:
- YouTube has critical mass which is VERY hard to get
- YouTube (like Google Video) is a complete browser-based system which fits in with google’s long-term scheme of providing a browser suite (mail, calendar, tv, etc.) on low cost computers to undercut Windows and Apple and dominate the world.
- 10% of all google traffic goes to youTube and they are the number 2 destination people go to (#1 is MySpace). Earlier Google did a strategic deal with MySpace so now the top 2 places people go to from Google are to google-friend sites
- This further underscores that the actual technology is no longer the most important asset in the web 2.0 world. Revver, JumpCut and even AOL Video have better technologies but YouTube has users and users are what matter. TagWorld, CyWorld, Bebo, Faces.com, and Multiply are all better than MySpace in that they look better, they have more and better features but MySpace has critical mass
- Page views equal cash and YouTube has a lot of them. Because they haven’t fully monetized them yet doesn’t mean they won’t. They needed a partner with an ad serving system and relationships with advertisers – Google’s the best at both. In fact, Scoble was wondering what it would have been like if Microsoft had bought YouTube – and it all comes back to who has the relationships with the advertisers. Google’s #1 business is advertising and now they added a major piece of page inventory and now dominate web video inventory too (YouTube is 48% of all web video).
- 1.5 Billion is a good price in my mind. People said 1/2 a billion was too much for MySpace. Less than a year later, MySpace got $900 million from Google so it could power the search on the site. There’s clearly money to be made here and 1.5 B isn’t too much in my mind.
What do you think?