[Josh] Google agreed to buy YouTube. And it makes sense. But now the dealmaking is going to get out of hand.
Yahoo!, Microsoft, and AOL have video sharing sites and social network sites, but they're now fighting for third place with Google buying YouTube and News Corp. buying Myspace. Charlene Li says Google is paying $32 a user for YouTube. Can Google make that pay? With their contextual advertising engine, I'm sure they can.
But the next deal, probably for Facebook, is going to come in at a higher cost -- probably at an unsustainable cost. There are just to many people desperate not to miss the social networking train before it leaves the station. That's bubble thinking, boys and girls, and it leads people to act in haste.
Tom Freston was reportedly cashiered as Viacom CEO for not being aggressive enough on Internet dealmaking. Will Freston's successor Phillipe P. Dauman, spend too much with Sumner Redstone breathing down his neck? I hope not.
Social networking is not a magic powder you buy and sprinkle on your company to make it ready for the next millenium. It requires two things. One is a commitment to have a real relationship with your users and let them talk to each other freely -- an appropriate goal for for Google, and probably for other portals, but a tough change to make at media companies like Disney that value control. And second, an ability to monetize those connections, very carefully, through advertising. That's what Google has going for it. The buyer of the next property probably won't.
Technorati tags: Bernoff, Forrester, Google, Yahoo, Facebook, YouTube
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