Eric Schmidt, CEO of Google, had this to say about the acquisition: "The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful."
Chad Hurley, CEO and co-founder of YouTube, had this to say: "Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners."
A few of eMarketer’s analysts pitched in with comments about the deal. Here is a selection:
Ben Macklin – Senior Analyst
It seems to me that it is nothing more than an advertising company acquiring a captive audience. As user-generated content expands, and video advertising becomes more sophisticated, YouTube can provide a nice test ground for emerging advertising methods and models. The beauty now for copyright holders is that they have someone big to sue if there are any serious copyright breaches.
John Gauntt – Senior Analyst
Everyone knew YouTube was in play because its private investors would not be able to maintain its growth without a business model. Another reason for getting it now would be to prevent Murdoch, Viacom or another media player from getting it. Google Video was lagging badly and if they did not get YouTube, then Google would be stuck with it…. Now they can quietly dump what is not working and slot in what works into a better vehicle.
The lawsuit issue I think is overrated because A) Google has deep enough pockets to swat away suits by jokers for the next 1,000 years, and B) YouTube has already publicly kissed and made up with tier-one content providers like NBC. Any big media owner that wants to sue the thing out of existence, a la Napster, is too late and there is no way they could hold together a coalition like before…. The user-generated horse is out of the barn.
YouTube Founders Steve Chen and Chad Hurley
I still think that Google is getting YouTube cheap. Anyone who can build a good video search business will do a lot more than $1.65 billion in ad sales, and this comes on top of what can be drawn from the site itself. I do not think we should overly ventilate about the YouTube site itself…. Sure, it is a good brand and reputation for video upload that works…but it has been iconic only for the past year.
A) Search is a volume business. Unless you have people executing searches (the ore), you can’t tune your algorithms to produce better results, which raises your value to advertisers (the gold). That is the genius of a lot of these community-based business models: You outsource product testing and QA to the audience. But if you can get some traction out there, you can out-innovate any closed shop that is trying to perfect its algorithms in house.
B) Searching text-based Web content is basically done as far as Google is concerned. Not in the sense that it does not count or will not expand, but it will not drive the ad revenue growth Wall Street expects.
C) Video is the next big gnarly search problem where there is obvious mass demand by both people and potential advertisers.
D) YouTube by far has the greatest archive of video content (especially user-generated) out there.
E) If you are going to build a video search business, you had better have a huge store of ore that you can organize and get people to start using while you record the activity and bake it into your next rev of the video search algorithm. You can bet that Google’s engineers are chomping at the bit to get access to YouTube’s server archives of video searches. It is orders of magnitude bigger than what they have with Google Video.
David Hallerman – Senior Analyst
Overall this is a great deal for Google.
— Who other than Google has the technical infrastructure to carry the increasing bandwidth of video?
— In the media space, it is more profitable to be mainly a distributor with some content, as Google/YouTube is, than to be just an ad company or just a content company.
— As big as YouTube has grown, and as much as Google has paid, only about 60 people work at YouTube. That is not much different than the other small companies that Google has previously bought, so integration could be relatively easy. (Yes, I know that YouTube will be kept separate, in brand and office, but the papa company will surely influence…. Mr. Hurley already is talking about pre-roll ads.)
— The data over time on user behavior, on a site where people spend time and are registered users, give Google the competitive tools for future non-search advertising that Yahoo! and MSN already have.
— Some numbers I have seen indicate that YouTube was already profitable, mainly from the CPM ads running on its home page.
— As for copyright issues, one advantage of taking ownership is deflecting and dealing with problems YouTube has had with copyrighted materials. Google, by not being a media company, is better positioned to negotiate with media companies for usage and compensation for those materials. In addition, Google is experienced in defending its ability to index and profit from others’ content. Google gives YouTube legitimacy.