Tuesday, October 10, 2006

Google-Youtube deal has been closed.

According to, Google has already bought Youtube as I guessed. It is good to me as Google loves Music Videos!

By Kevin Maney, USA TODAY

A landmark in the future of media happened over a meal at Denny's.
Last week, as multiple offers swirled around YouTube, Google (GOOG) co-founder Larry Page and CEO Eric Schmidt met YouTube founders Chad Hurley and Steve Chen at a Silicon Valley Denny's.

"We discussed the possibilities and the excitement we both shared" for video on the Internet, Hurley says. "They have the resources to help us accelerate that."

STORY: Google snaps up YouTube for $1.65B

Google is buying YouTube for $1.65 billion, the companies said Monday. The biggest force in search and Internet advertising is soaking up the biggest force in online video. But the combination means more than that.

The deal is part of a vision consistent across the technology and media landscape. It's the same vision that brought together YouTube and Google. Mass media — the grand media trend of the 20th century — is becoming personal media.

The Internet is making it possible for people to find and consume any song, TV program, video or movie anytime they want. That's because video content, from instructions on how to groom a poodle to clips from CBS' 60 Minutes, is increasingly available on the Net.

At the same time, cheap technology like video cameras and editing software is allowing just about anyone to create video content, adding ever more personal and esoteric media to the mix of offerings.

If you listen to YouTube's founders or Google's leaders, you can hear what that's going to be like. Search Google for "plumbing toilet flusher" and you'll probably find a how-to video on YouTube. "For queries like that, a lot of times video is the best result," Google's Page says.

Planning a vacation to Osaka, Japan? Search and find all the home videos taken by tourists and posted on the Web. Music videos, news and movie trailers will all be there. A few hours before Google said it will buy YouTube, YouTube announced deals to legally put music videos from Universal and Sony BMG on its site, and news and sports from CBS.

"This is the next step in the evolution of the Internet," Google CEO Schmidt says. On Monday, he kept noting that YouTube founders Chen and Hurley remind him of Google's founders in Google's early days — a couple of guys with a plan to alter the universe.
Bursting with video
All of this helps explain an explosion in Internet video. Venture capital investments in video-sharing sites are on track to set a record this year. VCs pumped $156 million into such start-ups during the first half of this year vs. $267 million all of last year, says Dow Jones VentureOne.
Internet video sites have exploded from barely any just one year ago to more than 240. New ones appear every week. The industry hasn't seen anything like it since the Web-retailing zaniness of the mid-to-late-1990s. Recent arrivals include Eefoof, Bix, Guba, Blennus, Stickam and Frozen Hippo.

Big players are crashing the party. In January, Google put up Google Video — which, by the way, isn't going away. "Google video doesn't go away ever — I want to make that clear," Schmidt says. Meanwhile, Yahoo and AOL are aggressively moving into video. So is News Corp.-owned MySpace.

Advertisers in just the past six months have come to love Internet video and are increasingly pushing ad dollars that way.

"You've got more video being viewed on YouTube than you do on some cable channels," says Ian Schafer, CEO of Deep Focus, a marketing firm that represents studios such as The Weinstein Co. He says that the marriage of Google and YouTube could form "another video network that in many ways eclipses the eyeballs of some mass media."

"We are seeing the number of terabytes of video delivered doubling every three months," says Alan Ramadan, a top executive at Macromedia, which makes the Flash player that shows video on both Google and YouTube. "I haven't seen this kind of demand before, and it's something that we all felt the Web could become one day — a distribution platform for rich content and experiences."

A busy weekend

At the center of the whirlwind stands YouTube, which actually moved its headquarters over the weekend from San Mateo to San Bruno in California's Silicon Valley — while the founders negotiated the Google deal. "It was a busy weekend," Chen says with a laugh.

The company launched in the summer of 2005, and by March 2006 was the star at high-level tech conference PC Forum. In January of this year, YouTube had 9.5 million unique visitors, according to ComScore. In August, that had grown to 72 million. To those users, YouTube is streaming more than 100 million videos a day. Yes, a day.

"This was a company that was moving very, very quickly," says Mark Heesen, president of the National Venture Capital Association trade group. He compares YouTube's trajectory to Skype, the Internet phone company started in August 2003 and sold to eBay last year for $2.5 billion in cash and stock.

In the past few months, it seems that everyone in technology realized the power of the video trend on the Net and saw the movement toward personal media. That's when the suitors came calling.

"A lot of parties expressed interest," Hurley says. Though he won't name them, Yahoo and News Corp. were among names that surfaced as suitors. "We wanted to remain independent, but as discussions progressed with Google, we saw an opportunity to remain independent and continue our vision, but with a lot more resources and experience behind us."

Google did, in fact, promise to leave YouTube alone — it will keep all its employees, separate headquarters, its own brand.

"I've been pretty giddy over this," Chen says. But he admits that he's not yet sure what, exactly, will change about the way YouTube or Google handles video. Right now, for instance, a search on Google Video will not find a video that's on YouTube. That will change.

"It all happened so quickly, the exact details of integrating the products are still up in the air," Chen says. "We're forming integration teams right now."

For Google, the deal means it now owns the top brand in Internet video and a backup plan for its own push into video. Google Video has failed to catch fire.

Some critics say Google just bought itself a boatload of potential lawsuits. A good deal of video on YouTube is snatched off TV programs and movies by individuals and posted there — and that could be infringing on copyrights. But Google and YouTube both waved that off on Monday, pointing to the day's deals with CBS and record labels as proof that content owners would rather work with YouTube than take it to court.

"The copyright concerns are overblown," says Suranga Chandratillake, CEO of BlinkX, a video search engine that competes with Google Video. "Content owners are more interested in doing business than ever" for Internet video.

They see how powerful this new personal media can be. The rock band OK Go recently proved that. It made a simple video with a handheld video camera of its four members dancing on treadmills and posted the video on YouTube. In four weeks, the video was viewed more than 3.5 million times. As a result, OK Go's album saw a 182% jump on Billboard's Digital Album chart and shipped another 50,000 CDs.

"This is a paradigm smasher of the first order," says OK Go manager Jamie Lincoln Kitman.
In the grand scheme of things, the $1.65 billion Google is paying for YouTube doesn't rank high among the largest U.S. buyouts so far this year, tracker Dealogic says. The biggest was a deal in March by AT&T to buy BellSouth, valued at $67 billion at the time. Alcatel agreed to pay $13.4 billion for Lucent in April.

But when it comes to shaping the future, a couple billion dollars negotiated under Denny's fluorescent lights might be the winner.

Contributing: Jefferson Graham, Jim Hopkins and Laura Petrecca