Google + YouTube = Video 2.0, or Why Andy Kessler is Dead Wrong and Robert Young Just Might be Right

from what i've heard, Andy Kessler seems like a smart guy. however, i think he's got his head up his butt on this take... i prefer Robert Young's analysis.

it's incredible to me that normally-astute entrepreneurs like Jason Calacanis and Mark Cuban keep complaining YouTube is just a bunch of hack technology put together by a few geeks who are ignorant of copyright law.  now they're all similarly thinking Google is foolish for paying $1.65B to jump into lead market share in online videos.  wrong and wrong.

Hellllooooo there folks... Google may be secretive and arrogant, but one thing they aren't is stupid.

do you think for a second that Google would buy damaged goods if its lawyers -- some of the smartest attorneys on the planet -- didn't think they could defend against litigation?  do you think for a second YouTube didn't have a game plan here with Napster as a glaring example of how NOT to play the hand?  or that Sequoia wasn't aware of the issue when it put millions into YouTube?

i am astonished that people keep missing the point here.  YouTube is growing like crazy.  Google knows how to monetize.  Video is the most compelling online medium, and is the biggest advertising market ever.  Google realized it was losing the race for online video, and knowing what was at stake -- a HUNDRED BILLION DOLLAR ADVERTISING MARKET -- it bought the leading player for a seat at the table.  end of story.

YouTube's metrics are impossible to ignore.  they hit it out of the park, literally killed it -- grew from nothing to top 10 web property in less than a year and a half.  they are by far the stickiest video property on the web.  whether or not they are currently able to monetize the eyeballs is hardly a question... everyone in the business would LOVE to have that problem to solve.   and although many think the legal issues put the other advantages at risk, a number of informed folks think they are in good shape.  regardless, with Google now driving the licensing & partnerships they should be able to find a path to both safe harbor & revenue.  Google already had deals with AOL & NewsCorp anyway, and YT/Google were closing others with more media partners as the acquisition ink was drying.

question: who has better negotiating position between Google and AOL/TW or MySpace/NewsCorp?  the guys dominating online advertising, generating revenue like crazy, and who just bought the leading video property, or the guys who lowballed YT then couldn't get their phone calls returned and couldn't figure out how to monetize their own traffic?  3 guesses, first 2 don't count.

maybe i misinterpreted Andy's commentary, but i think he's overly critical on Google buying YouTube.  (perhaps Andy thinks the Yankees overpaid for Babe Ruth too ;)  Two Kings, indeed.

regardless, Andy's 4-part series on Media 2.0 is terrific stuff, and worth the read.  guess i just differ on the analysis.  we'll wait a few years and find out.

(full disclosure: i used to work with some of the YouTubers a few years back when we were at PayPal.  note those same folks previously ignored the rules, built a huge business from nothing, dominated a market with much bigger players, went public in the face of numerous skeptics, then got acquired for a billion and a half by eBay.  if that sounds familiar, it's only because it is)

Comments

[JM]

Good post.

:-)

[gulli]

Thanks for that read - clear words while everyone else isn't getting the fact that Google is just more clever than every other company on the web...

[Shripriya]

Another reason why you should blog more - this post. :)

[Bill]

Very nice article!

[Erik Burns]

Dave, I found your thoughts through Zawodny's article. Your post is truly one of the most excellent reads on the YouTube acquisition I have seen. Now who's going to be the next Web 2.0 darling?

[chakpak]

Google needed a foothold in the video market. Youtube give it that. Google paid 1.65B for youtube. Its stock went up by 2B in a day. Youtube is already paid :)

[Scott Johnson]

Thanks for finally pointing out what should have been obvious to guys like Calcanis and Cuban. This is merely a play for a large advertising platform. Google is very much an advertising company these days, and, honestly, folks should understand that by now.