Oct
9
2006
Maybe I'm just too cynical, but now, after Google went from "Do no evil" to "Must accommodate the Communist Chinese government so we can make beaucoup bucks," I look at Google's snapping up of YouTube and see an acquisitive public corporation that is largely out to own things, a corporate model in the internet computing world that Microsoft has pioneered to such notorious repute.
"This is the next step in the evolution of the Internet," Google Chief Executive Officer Eric Schmidt said during a conference call Monday.
YouTube will continue to retain its brand, its new headquarters in San Bruno and all 67 employees, including co-founders Chad Hurley and Steve Chen. Meanwhile, Google will continue to run a less popular video service on its own site.
So the goal is really just to own YouTube.
YouTube has been a sensational success, proving that free social networking can work even with bandwidth-hungry video content. The online video revolution was not televised, but it didn't matter, it was videotaped -- or, rather, the revolution was videotape. YouTube has been the trailblazer. Google has been the also-ran, the giant who doesn't want to miss out on all the fun.
I'd like to think that Google's acquisition will mean that YouTube can be even better, but when it comes down to it, what this could mean -- and I'll certainly admit that this is by no means certain -- is fewer options for users, fewer decision-makers calling the shots, and a net loss for innovation and diversity online. We'll see. As Forrester Research's Charlene Li says in the AP wire story:
"It's going to be like, 'You can either fight us or you can make money with us.'"
In another interesting take, S. Garrett ponders Google's likely copyright headaches, and links to Mark Cuban, who says:
it will be interesting to see how Fox reacts to this deal Fox owns content. Neither google or YT does. Could Fox, the owner of Myspace put GooTube in a huge hole by being legally aggressive and going after every video of Stewy from Family Guy , American Idol, any of their TV shows ? The same with their movies. Beyond just Gootube, (and I mash them together with nothing but love :), Fox could make them look real bad by using supoaenas to go after individual Gootube users. Fox is also a stickler for DRM, they aint gonna like having their content floating DRM free around the net. Sure, myspace would have to clean up some of their own videos, but it would be a far easier chore than Gootube has. Now that would be a celebrity lawyer match worth watching.
Hmmm... David Smith on Preoccupations writes that Google is in the eye of the perfect storm over not just copyright but censorship, net neutrality and national security.
But forget what Li, Smith, Cuban, Garrett have to say on this. Forget what I have to say on this. And of course forget all the buzz you'll see on the old media television news channels.
More interesting will be what the YouTubers have to say about this themselves. After all, that's what YouTube proved, and why Google wants to own it.
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Comments
Erik Sundelof writes:
The "only" reason why it makes sense for Google to own YouTube is to make sure no one else does. That way they secure their market position. They also start to feel and behave like Microsoft in the good ol' days. We buy out our competition.
They are by their acquisitions starting to emphasize that they alone should do that. I think it is a dangerous development.
I wrote something more on the subject to put this into the broader picture. Link [Linkified. -Ed.]
katherine writes:
There is on Achilles heel with largely virtual firms. They have largely virtual assets. Trading at over $425/share and with a market CAP (worth in shares of stock) of $130 billion, Google is certainly flying high. According to Hoovers, Google's earnings per share (EPS) are $6.85. Normally this is not a very exciting return on a $425 investment.
Obviously people believe that Google is good. Something good will come of owning part of Google, or so people think. The idea that Bubble 2.0 will be followed by Bust 2.0 is the way of markets. Business luminary, Peter Drucker, reminded us years ago that in bull markets people could not imagine bear markets and vice versa.
The absolute dollars are, of course, important to players who are speculating. In the 1980s film, "Trading Places," Louis Winthorpe III (played by Dan Aykroyd) talks to Billy Ray Valentine (played by Eddie Murphy) about the commodities market. The two have bet every penny they can get (literally begged, borrowed, and stolen) so that they have a shot at cornering the frozen concentrate orange juice market:
Valuations go up and down along with the booms and busts. As Drucker says, these are "dance steps" of the economy. The fluctuation are chainging beliefs in the future. Yet the relative percentage, irrespective of the absolute costs, might be worth a deeper look in the case of Google and You Tube.
Right now, people believe You Tube is worth about one and a quarter percent of what Google is worth and that somehow Google and You Tube are better off together than alone.
Google's 5680 employees and You Tube's 67 employees means that You Tube's employees at about one and a quarter percent of Goggle's newly adjusted personnel number.
Is Google's worth, its personnel?
The stock prices will rise and fall, much like the stock market pre-1929, and in the end the tangible assets and values will maintain some sort of ratios.
It seems that brains here, and not machines (though there are plenty of those) is what will make this world go 'round.
Erik Sundelof writes:
Katherine, you are so right. I usually cite the entry by David Hornik at Ventureblog. I recently had a discussion about the dangers of virtual capital - both on a long term and a short term basis. It is also a 'structural' problem even though I do not think much can be done about it, and more over simply by raising the awareness of business people a lot of the dangers can be avoided.