Is it possible to have not heard about the Google-YouTube sale? Yes, less than 3 months after YouTube founders affirmed that YouTube is Not for Sale, the service has been sold to Google for $1.6 Billion.
The deal has been met with both rapt attention and wide debate from industry watchers, and has spawned some interesting discussions on the future of online media. If it is true that Google sees a future in online social media, then the deal makes sense. The deal is for stock, not cash, and with Google currently valued at easily over $100B, it’s not a high-risk investment. If however, YouTube’s sale price is simply a product of a race between Google, Yahoo and Microsoft, it could be overvalued. Remember - YouTube is a company that has never earned a profit, and has no publicly discernable business plan to do so in the near future. Is this a post-bubble bubble? An aberration? Pessimists may point to it as the beginning of the social media bubble.
The deal is not without it’s critics. Just a couple of months ago, Fox Interactive signed a deal worth almost $1B with Google for Google to be the exclusive provider of text ads on their network, including the potentially lucrative MySpace.com. Reportedly, the YouTube deal struck a nerve, and News Corp. threatened to remove all YouTube content from MySpace blog pages. This could hurt YouTube, as their content is currently widely shown on MySpace pages.
And why not? If YouTube content begins to include short embedded ads, then MySpace Google text ads will appear right alongside YouTube Google video ads. If the videos themselves can be somehow monetized, they can take advantage of (and take away traffic from) any website the movies are shown on.
But one of the main questions seem to be can YouTube make Google back it’s investment? YouTube claims they serve 100 million videos a day, with nearly 20M unique users per month. That’s a lot of eyeballs. But can savvy marketers get them to convert? Watching a video, after all, is a far more passive (and youthful) pastime than searching for online sales.
Microsoft CEO Steve Ballmer says “there’s no business model for YouTube that would justify $1.6 billion”, and that “The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google”. However, as Danny Sullivan points out, Microsoft has much to gain by criticizing the deal.
And of course, how can we not talk about the impending doom of Google from YouTube lawsuits (italicized for mild sarcasm). Remember - very little of the content shown on YouTube is actually owned by the company. There have already been lawsuits launched against YouTube, and it wouldn’t be surprising to many to see more in future. In fact, just today, Time Warner launched their lawsuit claiming copyright complaints against YouTube. That took, what, less than a week? With Google bankrolling the company, does that make YouTube a more attractive target for lawsuits? Or as threadwatch users suggest, is this particular lawsuit simply a bargaining chip? Only time will tell.
What Will Change
Quite possibly, very little. It’s entirely possible that most of the outcry and attention is born mostly out of a sense of “Doh! Why didn’t I think of that!”, than actual understanding of any deeper ramifications. In the Google-YouTube conference call, it appears that little may change - Google CEO Eric Schmidt claims that Google Video will stay, and Google’s Sergei Brin affirms there will be no data mining from YouTube accounts. However, Mr. Schmidt also claims that more investments into online video may be coming for Google.
Of course, now Yahoo is looking into buying Facebook. However, that offer shows signs of strain, and the price is going down along with Facebook’s traffic.
What Does it Mean for Online Marketers?
I personally don’t think that the YouTube sale should be casually dismissed as “just another dotcom sale”. This has potential for serious ramifications in the development of a more centralized online media industry – lawsuits notwithstanding. It could make for changes in the way that content is monetized in future, as well as how copyright is dealt with online. Not to mention that this could create a broad-base, potentially highly targeted, video marketing platform. Already companies such as Petro Canada have been taking advantage of the ready-made audience that is YouTube.
But you must consider the conversion rates. It is well known that in general, content networks convert at a lower level than active search ads. YouTube is an enormous content network which boasts an (very respectable) average 17 minute visit length. Can this traffic be effectively monetized? It may be that (blatant) promotion through YouTube may be limited to branding efforts.
How Can Marketers Take Advantage of This Deal?
In my opinion, it all depends on how Google plans on monetizing the content. There could be short imbedded leading, trailing, or even interstitial ads. There could be text links placed near the content, category links, or something we haven’t dreamed of yet. There could be ads in the actual content, or just ads on the site of the video or just on the page. All of this is speculation as we wait to see what changes the deal heralds in the YouTube business model.
Social networking tactics are probably the most effective way to approach marketing on YouTube - create something interesting, something funny, something shocking, and let the buzz grow “organically”. Just don’t go overboard with it.