Tuesday, October 10, 2006

Google Buys YouTube...

Yesterday, Google announced that it has purchased the video-sharing website YouTube for $1.65 billion. This can be looked at as 1) a rousing Web 2.0 success story for YouTube, a company which is still not profitable and has only 67 employees, and 2) a highly questionable investment on behalf of Google.

Clearly, Google aims to increase its standing in the emerging internet video hosting market. Google Video, a wannabe YouTube, has only 10% market share, despite its integration with the Google search engine. YouTube is the dominant New Media front runner, and despite its lack of profitability and few assets, its brand recognition alone justifies its acquisition.

But what has many observers on the edge of their seats is, as Mark Cuban has described, whether Google is opening itself up to lawsuits over copyright violations because of all of the unlicensed videos on YouTube. YouTube is already facing a tidal wave of litigation from the music and movie industries. The courts have not yet ruled whether sites like YouTube even have the right to exist in cyberspace, as they are being labelled as being little more than facilitators of piracy and copyright infringement.

The copyright issue could spell disaster for Google shareholders who will now be on the hook, in a legal sense. Not that they seem to mind too much yet. After the announcement, Google stock rose 8.5% on the day.

Wired poses the following question: Does Google have the cajones to go to bat for its new step-child and get the necessary media deals in ink? Or will Google get spanked by the MPAA, RIAA, and Google shareholders, thus bringing all of the recent momentum in the online video sharing world to a screeching halt?

Google's multi-billion dollar bankroll might be exactly what supporters of YouTube and user-generated content on the internet have been hoping for - finally having ample means to fight back against Hollywood and the music industry. However, the acquisition is still a little disheartening. Will every promising New Media and Web 2.0 startup get bought out by the giant corporate behemoths?

My only consolation is that at least YouTube was bought by Google and not by Apple :-)
  

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