YouTube finds a way out

[Josh] First I said YouTube was goin' down. Now the Journal is reporting that Google is talking about buying it for $1.6 billion. What gives?

It makes a strange sort of sense.

First of all, YouTube isn't viable until it automates detection of copyrighted material and takes it all down, as Revver does. Now, who do you think can do a better job of this -- 60 people over at YouTube or the engineering power of the GooglePlex? So, part one, solving the copyright problem is easier at Google.

Second, will media companies sue Google? You'd think so, since they have so much more money to get. But it's also a whole lot better to negotiate with Google for some sort of win-win. Google has a lot more properties with which to negotiate. So that makes some sense, too.

What does Google get out of it? Well, Google's video site has 1.5 million videos, but hasn't really figured out the social network features. YouTube has. And that -- plus a huge user base -- is what Google is buying. That could not only make Google video better, it could make all of Google better. For more on this, see my colleague Charlene Li's post.

So, by itself, I still think YouTube is toast.

But with Google -- maybe not.

Thanks for all the comments on the last post -- looking forward to what you think of this one . . .

Technorati tags: Bernoff, Forrester, Google, YouTube

Comments

[Davis Freeberg]

Josh - I'm a big fan of your analysis, but I think you've completely missed the boat on this one. The media companies might not be 100% comfortable with YouTube, but unlike Napster, they are negotiating with them instead of suing them. I also think that one could make an arguement that YouTube has significant non-infringing use and shouldn't have to deploy automated copyright technology even if they did get sued. Napster was all about copyrighted music, YouTube is about user generated content and they've been awful cooperative with companies that ask them to take down material. People could use the Betamax to copy movies, but because it had a legitimate use the courts let them continue. I don't see how YouTube is all that different, especially if they continue to comply with the C&Ds. If the media companies really want to get nasty they need to sue the users and not YouTube.

You are right though that someone isn't going to go after Google and in fact all along Google has the same issues with YouTube on Google video, but no one has been crazy enough to go after someone with their legal resources and no one seems to want to talk about why Google isn't being sued already even with the deep pockets.

I'm not convinced that YouTube needs an exit strategy as desperately as you point out. From what I understand they are selling front page ads for about $175,000 per day. That ad revenue alone should produce over $60 million in revenue and even with their bandwidth costs, I've got to figure that it's enough to make them profitable, if not at least get them to the point of profitability.

There is real value to the massive archive of user generated content that YouTube has already archived just like the archives that the studios are sitting on hold value. The difference is that YouTube has figured out a way to let users tap into that content and MGM instead keeps their old TV shows and films locked into a vault until they are ready to over charge for DVDs. You and Cuban can keep saying that YouTube is going to get sued into oblivion or that they will go bankrupt, but if this Google rumor turns out to be true, I think that you'll end up with a little bit of egg on your face.