This makes total sense to me for a number of reasons:
- Google’s search business makes so much money that they could leave the YouTube service the way it is and make back their $1.6B in 6-7 years just by putting Google search boxes all over the site.
- Given that Google is also not afraid of taking risk with IP issues–and going to bat in the courts over them. Google is the perfect home for YouTube because Google is excellent at holding the line on what they think is fair use and creating tools for folks to opt-out of their service. For evidence of this check their thumbnail, book-scanning, and news services. They’ve gotten attacked on all of those fronts and they’ve held the line, gone to the courts, all while respecting copyright holders.
- Since Google is not a big media company–but rather a friend of content companies–they will not take the flames from other media companies over buying the asset. They’re the advertising and technology platform company, so the media companies will feel comfortable with them buying YouTube. It’s like a neutral party buying the biggest asset in play.
- $1.6B is the number going around. Is it worth that number? Probably not, but given that Google has an advertising machine at their disposal they’re probably the only buyer in the market who could pay that price and have any chance of making it back. Also, buy taking out YouTube they will have locked up the three biggest non-Adsense players on the market: AOL, MySpace, and YouTube. Microsoft Adcenter and Yahoo Publisher Network are already facing an uphill battle… these three deals really box them out for a five years to come.
- Google will never put pre-roll ads on the service like a media company would want to do.
So, congrats to everyone involved… this deal makes total sense.