Google, MySpace and YouTube Fallout
Search Engine Journal has a pretty interesting post on the fallout of YouTube acquisition on Google-MySpace relations. I would comment, but sometimes, a picture is worth a 1000 words.
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I guess Google feels that they overpaid MySpace to deliver ads. I also guess they feel that they can attain the same run rate with YouTube and own 100% of the companies and have fatter margins.
Cant find the WSJ report that indicated that MySpace might now want to get an even closer deal with Google after the youtube purchase. Reportedly, things were gonna be discussed at the upcoming meeting between Rupert Murdoch and team and Eric Schmidt and team. In essence, the article/report suggested more co-operation quoting Rupert Murdoch than a competition. It’ll interesting to see what happens.
Google cares about two things: profiling and ad inventory. In order to grow/keep a fat market cap they have to continue to deepen their user profiling so they can continue to improve the relevancy of their advertising. At the same time, they need to broaden the number of advertising opportunities to each of these users. Well, first it was search, then it was adsense, then the toolbar/desktop products, then it was big publisher deals like MySpace. Now it’s video, and a lot of it at that.
The more pageviews they buy, the more they know about their users and the broader and more valuable the ad inventory becomes. It’s that simple.
Now that Murdoch knows Google owns YouTube, he can reconsider his plans to create his own YouTube service and instead “remind” Schmidt that 70% of his YouTube pageviews can be gone overnight pretty easily. I’m sure we’ll see a new deal shortly between YouTube and MySpace.
As a Yahoo shareholder, I’m glad Yahoo didn’t buy Youtube. At $1.6B, that’s a rich valuation for a company that hasn’t shown whether or not users will bolt when they launch the big ads. The death of Friendster shows that people do leave for better things, despite whatever network effects that are supposed to keep them there. Yahoo has a long history of bootstrapping and rolling out its own services and usually they achieve significant market share at minimum risk. The question is will not ability. If they seriously entertained purchasing Youtube, then presumably they now have the will to mimic the technology and given their huge base of users, they should be able to push video uploading/sharing/embedding with no problem. Yahoo, Godspeed!
Will have preferred Apple to buy YouTube. I see Apple playing a big role in supplying the missing piece for GBook and GTube anyways.