Prompt's TechBlog
Why Would Google Want YouTube?
06 October 2006
Posted by Fiona Campbell-HowesBut given that Google already has its own online video sharing technology, Google Video, why would it be spending its pocket change on a new one?
Put simply, YouTube is *the* online video brand. Its name has become as synonymous with online video as MySpace has with online social networking. If this deal is going ahead as reported, Google isn't paying $1.6 billion for a technology - it's paying it for a name.
Critics will inevitably point out that it's a risky move, as YouTube is stuffed to the gills with pirate content that could impinge heavily on Google's reputation for 'not being evil'. But people who have been monitoring the recent upheavals in the entertainment industry will have an idea what Google may have in mind.
Across the board, cinema visits are down, television viewing is down, and consequently broadcast advert viewing is also down. The 18th September issue of Red Herring reported that MTV saw a 28% drop in ratings from 2005 for its recent Video Music Awards show. The previous day, Wired editor Chris Anderson showed on his blog how US box-office takings started falling dramatically in 2005. Yet in July, Nielsen NetRatings estimated that YouTube's US viewer figures had grown by 297% in the first six months of the year.
These figures are symptomatic of a fundamental change in the way people are choosing to access and consume their entertainment - and the entertainment and advertising industries are being forced to respond. By acquiring the leading brand in online video sharing, Google will be in a position not only to reach out to YouTube users with the advertising that is already providing the lion's share of its revenues, but also to court music video promoters, film studios, TV production companies and every other Tom, Dick and Harry in the visual entertainment industry.
If the move makes sense for Google, it also seems to makes sense for YouTube. Forbes magazine reported in April that the company had secured $11.5 million in VC funding in the previous 12 months, yet estimated that it was burning through $1m a month in bandwidth costs serving video to its 12.9 million users. Working out the maths isn't very hard.
Comments:
But the *really* big Google deal of the week was surely snapping up the Menlo Park garage where Sergey and Larry first strutted their stuff!
I'm guessing this takeover came in slightly under the $1.6bn mark though...
Hi Fi,
Would just like to counter your assertion that the viewing of broadcast advertising is going down. In fact it has never been higher. I could bore you lots of numbers but you can trust me that it is so. If you want to see the numbers pop into www.thinkbox.tv and there is a section full of charts and stats.
With digital switchover planned to be complete by 2012, it's highly likely that more and more ads will be seen, because when a home becomes multi-channel the share going to BBC channels declines and the viewing to commercial channels rises.
As for that whole PVR 'scare', several recent studies as well as the TV industry standard research system ,BARB, have shown that homes with a PVR end up watching more ads, despite the fact that they fast-forward 70% of the ads in the content they watch from the hard-disk recorder. That's because they watch about 12% more TV overall and less than 15% is from the hard disk.
Obviously though, with so many more channels, growing all the time, the viewing to any individual transmitted programme or spot is likely to decline, hence your MTV example. For instance there are about five opportunities to watch Lost,via C4 and E4,within the first week following its initial transmission
so the total audience is split 5-ways.
In fact, many people believe that the recent decline in Tv ad revenue, has been exacerbated by the fact that there are so many more TV ads being viewed - and that's without counting all the viewings on interactive platforms.
Just thought I should clarify that.
Bye for now x
: Tuesday, October 17, 2006 12:46:00 PM
This is great stuff Tess, many thanks. You know far more about this than I do, so I'll accept I was wrong about broadcast ad viewing going down overall (and will update post accordingly).
However, I'll stand by my assertion that the way people are consuming television is changing, and changing quickly, and that consequently advertisers need to reach people via new channels like YouTube - which is why the deal makes sense to Google.
Incidentally (and this is anecdote not research), there's a 'certain' Barclaycard advert doing the rounds at the moment that I've *only* seen on YouTube :-)
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