The New Nickel-Tube: Google and YouTube

So Google purchased YouTube. US$1.65B in shares, paper-work money or an entry in an SEC filing.

In cold-hard numbers: YouTube has a reported 100 million viewers per day; based on the purchase price, each view equates to US$0.0452 over a year. Or, another way to look at it: as long as Google “earns” US5c for each pair of eyeballs for a few minutes, within a year it is financially ahead.

Considering the current cost of both text-advertising and TV advertising; and the oncoming onslaught from competitors such as Microsoft and Yahoo!, US5c per view seems rather attractive.

Opportunity cost of not owning YouTube: a competitor would have purchased it, first. Fox had already purchased the young Myspace eyeballs; and Microsoft is serious about the online world and has all those XBoxen, Vistas, Zunes to capture other eyeballs. YouTube was obviously on the block for sale, and each viewer is valued at US$0.0452. US$1.65B is not too much compared to a competitor getting the brand. YouTube maybe the “text breakout” and single product weakness that dogged Google in recent months. (Robert Scoble has a perspective on this, too)

Looking into my crystal tube: Google’s Video Future: It is all about about the advertising. Potential changes to Google Adsense:

• Text links inside an ad (transparent text on bottom); through to top+tail video or sound bytes
• Throw more smart maths at technology to recognise the content inside video and then attach appropriate a like advertisement
• The original publisher of youtubes (another verb coming on, here?) self-categorises, so advertisements could similarly be targeted.
• For youtubes posted on blogs or other non-Google web sites; understanding the context would permit smarter targeted Adsense ads

Instead of crawling the internet, Google is becoming the internet. This is rather a scarily thought that crossed my mind when reading this Wired article (The Information Factories) on their new data center in Washington state, US. Ultimately, it may have been cheaper to buy YouTube than create a backing-store to hold indexed video and sound.

So next: watch Apple and Google. Not sale or purchase, just closer ties. Apple needs the content, Google needs the hardware. Microsoft is the common competitor.