Google Confirms YouTube Deal
The news about Google’s plans to acquire YouTube has proven true. Google has just announced that it will acquire YouTube in a stock-swap deal worth US$ 1.65 Billion.
MOUNTAIN VIEW, Calif., October 9, 2006 - Google Inc. (NASDAQ: GOOG) announced today that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community.
Offhand, I see the deal benefitting both parties this way: Google gets YouTube’s userbase and community (along with the market data YouTube has gathered so far and continues to do so), and YouTube gets better accesss to revenue streams from advertising.
ForeverGeek has a post detailing interesting opinions on why this deal makes sense. The post basically reasons that acquiring YouTube is one way Google sets itself ahead of the pack. Video advertising is expected to be the next best thing, and Google is already positioning itself as the leader, when its competitors (Yahoo!, MSN, etc.) are still starting to fiddle with contextual text-ads.
Also, it’s the YouTube brand that’s likely to be the most important aspect of the acquisition. YouTube already has excellent mindshare, and Google knows that this is just what makes a successful web application. With the large community already revolving around YouTube, Google can expect tons of market data. Everything else is just icing on the cake.
If this turns out to be a synergy–where the acquisition will produce more value for the larger entity, as opposed to each running on its own–then good. If it fails, it probably won’t make much of a dent on Google’s bottomline. $ 1.65 Billion is just a small amount considering Google’s performance so far and earning potential. And no cash changed hands, after all. It’s a stock-swap!
Implications to television
I’m a fan of Web videos because it’s one form of video-on-demand. I get to do searches on videos and watch them when and where I want to. Admittedly, I do watch some show episodes on YouTube, and the very presence of those videos is against the site’s terms of service, because they are copyrighted material.
With Google entering the picture, there had been speculations that YouTube will be facing lawsuits left and right because they will now start earning revenues off other people’s copyrighted material–this is no longer within fair use principles. But with Google on the business side, it might be able to strike a compromise. Why not do what the television networks are doing? Why not show advertisements (text ads, and even video ads) along with the freely-viewable videos, and give the copyright owners a cut? In my opinion, pay video is bad in that it limits the viewership, and does not satisfy the audience, because of low quality of Web-videos.
As for the traditional television routes (free TV, cable, PVRs), this could spell trouble. Google is known to own tons of dark fibre running across the entire United States (the company has been buying defunct ISPs and broadband providers). Once it decides to start using these to boost bandwidth across the country, then Google could just be creating the next big multimedia network since TV was invented.
Google Interested in Acquiring YouTube
Search giant Google is reportedly interest in acquiring popular video-sharing site YouTube, according to a report by CNN. Google and YouTube are in discussions, but would not disclose any details for now.
Recall that Google already has its own Web video service, Google Video, developing its own format along with content available for-pay. Google has even gone to the extent of incorporating video advertisements on its Adsense publisher program.
However, if estimates are correct, YouTube gets 100 million video views per day, and that makes it the largest video sharing site online.
One very pressing issue, however is copyright. YouTube has been criticized for its users uploading copyrighted content. While this is against the YouTube terms of service, it has become very difficult to enforce. And most copyright holders (TV and movie studios, for instance) have become lenient, presumably because YouTube helps spread the popularity of their content, and since YouTube still does not have a compelling business model to date.
But once Google–or any other larger company, for that matter–decides to acquire YouTube and put up a clear business model for the content online, then copyright holders are sure to protest (and sue).
Watch Cable TV on Your Computer
While free TV was the only way to watch video content in the earlier 20th century, this was replaced by Cable TV. And while cable TV used to be the only way to avoid boredom from a limited number of freeview channels, today you can entertain yourself with downloads from the Web or DVDs.
Watching videos or even TV through computers is increasingly becoming popular, and is especially popular among households and individuals who would rather not spend extra for . This can be done either by installing a TV tuner on your computer via PCI, PCI express or USB 2.0 and plugging in directly to the cable TV outlet, or downloading from the Internet. Today’s proliferation of Broadband connections makes it easier and less costly to stream videos thru the Internet. Hence, if you don’t have an actual CATV connection, you can now ideally view TV shows online as long as there are content providers that are willing to do so.
One such content network is TVU networks, which has made available a freely downloadable player that lets Windows XP users watch several cable TV channels online.
I’ve tried it on my laptop using a 384 Kbps connection and the video and audio quality was decent enough for casual viewing. There’s not fullscreen mode, though, and the resolution is about half that of regular NTSC TV (which is about 640×400). I’ve experienced some choppy streams every now and then, but I’m not complaining since I do have an actual CATV subscription, anyway, and I only use TVU so I can monitor TV channels while working at places without TV (say, at the WiFi-enabled cafe).
Channels include Star TV, CNN, Al Jazeera, CW, ESPN, ABC, CBS, NBC, Disney, Cartoon Network, and the Animal Planet, among others.
New Revenue Models for YouTube
YouTube is exploring a new revenue model with Brand Channels, which are basically like just every other YouTube account publishing amateur videos, but this time the intent is to push products. In this case, the initial run will be a deal with Warner Bros. Records, which will promote Paris Hilton’s latest album thru videos of the model-turned-singer.
Beginning Tuesday, YouTube will roll out its first Brand Channel, where Warner Bros. Records will promote Paris Hilton’s debut album, “Paris.”
Brand Channels are much like the channels created for all YouTube users who upload their homemade videos to the site, though the purpose of a Brand Channel is to sell a product rather than to simply promote one’s ability to attract an audience for their work.
The Brand Channels will be financed by sponsors. In this case, the Paris Hilton album videos will be sponsored by Fox.
Another revenue generating scheme that YouTube is embarking upon is Participatory Video Advertising or PVAs. These are video commercials that, just like any other video on YouTube, members can rate, comment on, and embed on their websites or blogs as they please. This is a win-win situation both for YouTube, the advertisers, and the site’s userbase. YouTube gets advertising revenues, while in turn the advertisers get direct feedback from users (and perhaps it’s not as expensive as buying a 30-second slot on traditional air TV). The users, meanwhile, get to provide their feedback on the ads, and they can bookmark favorite ads as they please (considering there are quite a lot of adverts that are entertaining and interesting).
Paris will sure make the YouTube experience interesting.
Youth Prefer the Internet
A survey by British media and telecommunications regulator Ofcom has determined that young people are increasingly turning towards the Internet for multimedia needs, thus effectively lessening television viewing.
The young are abandoning television and radio in favour of the Internet, a survey has found.
The ‘networked generation’ - those aged 16 to 24 - are increasingly turning to the Internet for entertainment and information, said communications regulator Ofcom.
It found that they spend one hour fewer per day watching television on average than other viewers. And they are shifting away from terrestrial TV, spending only 58 per cent of their viewing time watching the five channels.
With downloadable and streaming content available from popular websites such as YouTube and iTunes, the Internet is making access to hard-to-find, niche, or off-time content easy. Particularly with today’s busy lifestyles, there is a preference for time-shifting. Hence, people–young, active individuals in particular–would rather consume content when and where they want it, not having to wait for television schedules and content with commercials.
This should make those in the broadcast business think of alternative business models, such as pay-per-view via the Internet or ad support in Web video, for instance.
Firefighters in Hot Water for Posting a Prank on YouTube
Be careful about posting pranks on YouTube. For all you know, you might be doing something really stupid (in an illegal way) and the authorities would have proof.
Officials are investigating after a uniformed firefighter was apparently filmed being spun in a tumble dryer.
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The video shows a uniformed man climbing into the industrial drying machine and packing clothes around to cushion himself.
Here’s the actual video on YouTube. I watched it, and it seems pretty funny. And our heroes (firefighters, police officers, and others in the uniformed services) do need to lighten up a bit every now and then. However, these people risk damaging equipment and even hurting themselves, which is quite worrisome from a taxpayer’s perspective.
MTV and Google to Display Advertising on Web-based Video
Google made a killing with the way it popularized contextual advertising and how it shared the rewards (read: money) with publishers, particularly those who used AdSense. What’s great is that the advertisers were able to target their marketing efforts to those who are likely to be more interested, and that they didn’t have to pay a cent for deadweight in advertising, since they only get charged for clicks (or theoretically, at least, because clickfraud has been rampant lately).
In contrast, traditional advertising has always been riddled with inefficiencies. Advertisers spent millions when the marketing would be aimed at a very broad audience, most of whom aren’t likely to be relevant at all.
The concept of Web video has been a boon and bane for traditional media stalwarts. First, there is a threat that Internet video would eventually supplant broadcast TV. But there is also great potential for Internet TV becoming the next multimedia goldmine. If only there was a good way to incorporate marketing into videos, then both online video providers and producers would have found the holy grail in online advertising.
It seems today’s biggest names in either side of the spectrum are trying to do just this. From Reuters:
NEW YORK/SAN FRANCISCO (Reuters) - Viacom Inc.’s MTV Networks has agreed to distribute clips from its cable networks over Google Inc.’s advertising network, in a test of what could become a new economic model for Web-based video delivery, the companies said on Sunday.
The project, a year in the making, marks the first time Google will distribute ad-supported videos across its AdSense network from a major programming provider. The ad-supported video distribution project will begin testing later in August.
Google’s AdSense network currently handles primarily text and graphical-oriented brand advertising. The MTV trial, if successful, would highlight the progress Google is making in evolving beyond its reliance on delivering Web-based text ads from which it derives most of its revenue and profit.
Expect to see popular Viacom properties online–this would include MTV and Nickelodeon shows, such sa Spongebob Squarepants and Laguna Beach.
Is YouTube Finally Overtaking FreeTV?
YouTube reports that it’s getting 100 million video streamings per day. These are mostly “bite-sized” snippets of videos.
Since springing from out of nowhere late last year, YouTube has come to hold the leading position in online video with 29 percent of the U.S. multimedia entertainment market, according to the latest weekly data from Web measurement site Hitwise.
YouTube videos account for 60 percent of all videos watched online, the company said. Videos are delivered free on YouTube and the company is still working on developing advertising and other means of generating revenue to support the business.
Incidentally, during the same period, television viewership seems to have declined.
CBS, ABC, NBC and Fox averaged 20.8 million viewers during the average prime-time minute last week, according to Nielsen Media Research. That sunk below the previous record, set during the last week of July in 2005.
It wasn’t entirely unexpected. By tradition, the week that includes Independence Day has the fewest viewers of the year, or close to it, because rerun season is in full swing and the public is consumed with outdoor activities.
It’s either people are going out more with this summer season, or they’re resorting to alternative sources of entertainment, such as the ‘Net. When YouTube started out last year, I didn’t think it would be as popular as it is now. I thought it would be just another one of those short-lived web apps. Even with Google’s launch of its own video service, YouTube has stood strong. Perhaps it’s the community aspect of the service that made it so popular. According to Forevergeek, YouTube is actually now among the Web’s most popular destinations, even surpassing MySpace.
Is YouTube really worth the $1 billion price tag people are attributing to the video service?
ABC to offer shows online
Related to our earlier post on Disney’s publishing video content online, ABC.com is likewise about to launch a new version of its website, where readers can view shows online. Akin to Disney’s system, ABC will publish its archives, and shows will be available the morning after broadcast. Shows are ad-supported, and users have a choice of plain ol’ ads or the more interactive ones.
Do note that the Disney and ABC websites are both published under the “go.com” banner, which is a web portal owned by the Walt Disney Internet Group, and contains content from ABC News, ESPN, Movies.com and Familyfun.com.
A new version of ABC.com will launch April 30, featuring episodes of several popular shows that users can watch online. They’ll be able to pause, fast-forward and rewind — but won’t be able to skip the three built-in ad breaks. They will, however, be able to choose if they want to see a normal video ad, or a more interactive one, like a game. Shows will be available the morning after they’ve aired, and eventually ABC will store archives of episodes so users can watch an entire season.
Of course, this is still a step behind IPTV–as this is more aptly considered under “Web video.” But it’s a good step towards eventually showing everything via the Internet.
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