Reasons for buying YouTube… and what to do with it

October 7, 2006

The execs at Google must be wondering what the hell is going on this morning. Yesterday the news was ‘broken’ on Techcrunch that Google were looking to buy YouTube for $1.6bn. Before long it appeared on the Wall Street Journal and within hours every blog and news site was carrying the story. There’s been no comment from either party and all the stories refer to it as a rumour. So is this a case of traffic driving to blogs by ‘breaking’ the news or is there more to it?

There are a number of reasons why Google would want to buy YouTube:

  • Traffic – YouTube gets more visits than Google Video
  • Competition – if Google buys it then no-one else can (everyone else has launched video services now)
  • Brand – if it’s true I’d say Google would keep the YouTube name as it’s a recognised brand worldwide now in it’s own right
  • Money – huge revenues can be generated from YouTube if someone monetizes it correctly

Now, there are of course reasons why they may not want to buy it:

  • Legal – YouTube is getting sued for copyright breaches, Google stands more of a chance of defending these than YouTube alone, but would it want the liability?
  • Bid war – YouTube is so huge that any offer by one of the big web names (Google/Yahoo/Microsoft) could spark a bidding war that would end with a huge over valuation
  • Needs – does Google need it? For all we know Google Video may have a trick or upgrade up it’s sleeves that could take back the online video mantle anyway, and Google hardly needs the traffic…

The most logical reason is to take it off the market to prevent competitors getting their hands on it. If the rumour is true I’d hazard a guess that this is the thinking in the Google camp. With Google promising to get into broadcast and radio etc it would be a decent acquisition and give Google Video a hand up the ladder as well.

Of course, if bought YouTube could be swallowed into the Google fold and all features be merged into Google Video, thus extingushing it from memory as an individual entity and getting all the brand kudos for Google. This would put them back on top very quickly in the video sharing market!

I’m not so sure they need to buy it though (unless a competitor shows interest). Google has the traffic, brand and market share to make a success of Google Video even if YouTube stays independent. In fact with some new upgrades Google Video could easily steal back traffic from YouTube as web users are fickle and will go where the service offered is best (up to now that’s YouTube).

Be interesting to see what happens next week on this one!


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