Google Buys YouTube – Why $1.63B

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Google Buys YouTube – Why $1.63B

Millions of people watching videos from the YouTube online community – drove the valuation of the company to $1.63 Billion – and Google paid that much for it. It might boggle the mind of the non-Googlites - but it was the slickest media grab ever - and will forever change the shape and form of video.

There is a really good chance that you’ve never watched or shared a video at YouTube. Don’t feel left out – with over 200,000,000 online citizens racing through the online hallways – some of them are grabbing video and others aren’t. It didn’t take a high percentage of the online citizens using YouTube to establish what advertisers call “critical traffic threshold”. Which is really a way of saying that YouTube is getting so many visitors and creating so much “buzz” that advertisers will pay as high a rate as YouTube will get – just to be in front of online eyeballs!

You can’t blame YouTube’s two founders for selling a business that is less than two years old and that never produced a profit - for selling at a billion point six three. But you can question the logic of a Google who paid it. The questioning won't get you very far - and in fact, the question you'll really get sick over is - "Why didn't you buy the stock when it hit the street at $70, or there abouts?" The immediate response from the investment community – the owners of Google – was a 7.9% increase in Google stock price – nudging the G-stock near $600 a share – some experts in this area say the stock will soon go over $600.

But what about the long term? Today, it is easy to build a formula where traffic equates to dollars per view – and then print stock certificates to buy the high traffic raceway. If this was a pet rock merging into Hallmark stores at a +Billion valuation - I'd say it was crazy. But it is not like that. Consider this, with Google Video and YouTube united - two-thirds, yes two out of three online video experiences - are delivered through a Google space and experience. The first truth that brings to mind is that Google is the largest video network the world has ever known - and it is in its infancy! The next truth, is that there is no imaginative completion - yet. There could be but Google and YouTube cultures aren't worried about that. I suspect the strategic plan for Google (and YouTube) was always to harbor the "independent" video producer's productions. Uploaded and file shared video clips are out there by the gazillions (is that a number?) - well there are a lot of them. When 8mm video was the state-of-home video - most low-fi video was pretty lame. But today, you can get a SONY HDR-HC1 Hi-Def camcorder for $1300 - and awesome desktop digital arts workstation for less than $3000 - and make the digital equivalent of feature films. Granted having the fight camera and post production stable doesn't make you a creative or talented producer - but it does help. The other significant thing about the desktop producer crowd, is every six months, they re-engineer their skills and production styles - and the serious students are creating some wonderful productions. Google Video is offering this and future generations of digital producers a "studio" that treats them fairly (actually with great respect), allows them access to global online distribution, and supports them in anyway needed (in hopes of making the Google experience the best it can be). The next logical elevation for Google Video is to build the technical bridges between the licensed news broadcasters, because there producers are all ready in the local markets, 24/7 making high quality reports and content. Few people in the television audience realize this, but over 75% of what you see coming from your local stations - is coming off of IP or disc. There is hardly any tape anymore - and news rooms are paperless. Reporters in the field are either transmitting from location, editing in non-linear file format in the van on the way back to the station, or compiling the "file" for the "playlist" that is switched through the control room in live shows. At the moment, the television stations do not capitalize their content after the broadcasts - although some have formed networks and the content is starting to flow-stream. Well, Google Video could overlay a simple network structure that mechanically splits content from the station as it is broadcast - or as it is produced into a multiplex of local stations. It could be the same model the Internet Broadcasting Association used in the 2000 NAB Global Internet Broadcasting Demonstrations as well as the IBC 2000 repeat of the NAB event. Or something like the early interactive TV platform Oracle had in Finland.

All and all, the key to Internet Broadcasting still is in the hands and minds of the content producers. And, luckily for those of us who produce content – there are more and more places to broadcast our work. Google is setting the bar very high for competitive network/syndication providers - and that's OK with me!

Stay Tuned – iBA

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