You may have noticed that I never wrote anything about Googleís recent acquisition of YouTube while the rest of the world seemed to be.

Thatís not entirely true. I wrote about it a bit on an internal mailing list at work. What I read there and all over the Internet shocked me. A significant proportion of people completely missed the point. They thought Google had gone off the deep end.

I was shocked. It was so pervasive that I figured I better keep quiet, since I was obviously missing something.

People wrote about how the site is ugly, the technology sucks, the potential legal problems, and so on. They made passionate arguments that sounded convincing if you didnít understand the business that Google is in.

The Light

My hatís off to Dave McClure, the Master of 500 Hats for finally saying it.

Itís not about community, design, technology, or copyright. Itís about eyeballs. Lots and lots of eyeballs. Itís 1999 all over again.

Google bought themselves a really, really big video advertising distribution network (or ďplatformĒ if you prefer).

Can someone please explain to me why this wasnít blindingly obvious to a lot more people? Iím at a loss here. I have been since the speculation of the deal first surfaced.

Another Way

In trying to explain this to people, I pose a different question: What's the single biggest threat to Google's continued growth?

The variety of answers I get is interesting, but few people hit the one I have in mind: a lack of inventory. Their ability to find new places to stick ads is the single biggest threat to the continued growth for their business.

That's why they're doing deals with MySpace, Dell, and all sorts of companies. It's all about the eyeballs, or inventory (as DanR recently said[*]).

I don't know about you, but as a Google shareholder, I'd be pretty upset if they weren't pursuing deals to expand their inventory. Of course, as a Yahoo! shareholder and employee, I hope they're not too successful. :-)

* Note to Thomas Hawk: That was kind of a cheap shot, with you being the Chief Evangelist for Zoomr, a Flickr competitor--one whose name makes me think "copy cat."

Posted by jzawodn at October 18, 2006 10:21 PM

Reader Comments
# Thomas Hawk said:

Hey Jeremy,

The fact that I work with Zooomr doesn't preclude me from expressing opinions about Flickr and Yahoo. I've posted thousands (literally) of things about Flickr and Yahoo before I ever joined Zooomr. I even had and still maintain (less so lately because I've been busy) a seperate blog devoted to nothing but flickr, FlickrNation.

I've also of course spent thousands (again literally) of hours inside of Flickr participating in that community. I know it well.

My affiliation with Zooomr is prominently disclosed and known by anyone who visits my blog regularly.

It seems odd to me that you'd expect me to *not* post on Flickr when the COO of Yahoo publicly in an earnings conference calls brings up Flickr by name multiple times and says that Yahoo is going to "monetize" their social networks -- the first time I've ever seen this so blantenly in public by the way. Also the first time I've ever seen the 20 million monthly user number reported as well.

The majority of my post was me simply quoting your own COO and then wondering what was meant by his remarks.

He or anyone, or you yourself for that matter, can feel free to join the conversation and elaborate on what his intentions are.

The fact of the matter is that Flickr and Yahoo have been secretive about the future development of Flickr and other Yahoo social network properties. I've talked personally with Flickr staff about some of these ideas regarding things like stock photography over a year ago that seem to have evaporated with no information passed on to the users of the service whatsoever.

More transparency is a good thing, not a bad thing -- you of all people at Yahoo know this. But certainly when your own COO makes public remarks these are not off limits for anyone who happens to be a competitor to Yahoo.

Maybe instead of finding fault in someone daring to address his statements (due to the fact that they work for a disclosed competitor) you should shed some light on what he *really* meant when he said he was going to monetize your social networks.

Not a cheap shot at all.

on October 18, 2006 11:21 PM
# Charles said:

Renting eyeballs seems to be getting a lot more expensive lately.

on October 19, 2006 12:14 AM
# Steve said:

It's not just "eyeballs", it's something slightly different, like "attention time". In order to make money, ads need to be wherever you are paying attention. (and be relevant, etc. of course.) Therefore google needs to be in front of you in whatever environments you're spending your time.

Search was an obvious one (that's very targeted attention) but it wasn't the only good idea. For instance I don't know why people were confused when google introduced gmail - it makes more sense when you think of it as the #2 app most people spend time in, after the browser.

Youtube started gaining lots and lots of attention time, not just eyeballs, and that made it worth locking up - whether through an ad deal or outright acquisition...

I'm still not sure whether this makes it a good deal at $1.6b or not!

on October 19, 2006 12:35 AM
# Nick Hodge said:

A Nickel a view for a year.

on October 19, 2006 01:03 AM
# Eric Jackson said:

Hi Jeremy:

I agree with you. I was also baffled by the lack of attention to your point above.

However, I think it goes beyond eyeballs. YouTube will be a popular brand in and of itself beyond just Google. However, that still supports your point: more eyeballs to view more ads.

Here's my recent post on this: http://breakoutperformance.blogspot.com/2006/10/google-youtube-shona-brown-and-galaxy.html

Thanks,

Eric

on October 19, 2006 01:37 AM
# Ryan said:

The problem Jeremy, is that most people think Google is a technology or a search company or what not.

Many people fail to think of them as an advertising company. If you start to view them in that light, all of their actions make sense.

Also.. what about those of us who own stock in yahoo AND google? I actually bought a lot more yahoo stock after it recently fell.... don't dissapoint me here!

on October 19, 2006 06:30 AM
# Mitch Ratcliffe said:

I don't think people ignored this question of eyeballs. But you have to be able to a.) keep them, which isn't very easy when we're talking about social media in which people can move to new sites and services easily, and, b.) do so at a lower cost than acquiring them through other Google venues.

In other words, eyeballs aren't what they used to be.

on October 19, 2006 06:33 AM
# Erik Schwartz said:

When asked in the spring of 1999 why we had just bought Geocities for $4.7 billion, TK said, "We're buying reach". Buying uncomitted users is a risky business. They can easily migrate if they become unhappy.

YT is a brand and YT is a community, but both of those a second order definitions.

First and foremost YT is a process for utilizing the Flash video technology that users find appealing. That's what built the community and the brand. That's the differentiation from the zillion other video sites online. Easy uploading, easy embedding, no preroll or postroll, those are key aspects of the process.

For Google to monetize that community and leverage that brand they have to change the process that built that brand and community.

There is enormous risk in changing that process.

on October 19, 2006 06:35 AM
# Martin Plante said:

This comment from Erik Schwartz says it all: "Buying uncommitted users is a risky business.".

Online traffic is deeply linked with fashion; Will YouTube keep its high traffic for decades? Can it really draw new users to Google itself? I've always thought Google's strength wasn't the fact it controlled a few huge sites, but rather millions of sites advertising via AdSense/AdWords. It can't fall at once. Yes, they had to buy YouTube. Yes, they couldn't have bought them for less, not at this moment. But I'm curious about how they can transfer a "one video site traffic" into a "we now better control video advertising on the NET". VideoAdSense anyone?

on October 19, 2006 07:44 AM
# Cal Evans said:

Jeremy,

Here's a different take on GooTube (or my favorite YouGoobe)

http://www.wormus.com/aaron/stories/2006/10/18/project-blackbox-google-youtube.html

It may not be about the advertising at all. (Well, not directly anyhow)

=C=

on October 19, 2006 08:13 AM
# Jeremy Zawodny said:

Cal:

You wrote:

"The move to video is the only way that Google can continue itís growth as an advertising giant. They have saturated the Web space and need to provide other ways to provide advertising inventory to their clients."

So it sounds like we agree. :-)

We may have differnet ideas about the eventual implementation, but we're coming from the same place, it seems.

on October 19, 2006 08:36 AM
# Chris said:

The reason people completely missed the point is that they saw the deal as a platform acquisition.

Imho, Google Video (as a platform) is a lot better than YouTube - more enjoyable viewing experience and better search, but Google lost to YouTube for a reason.

YouTube was purchased strictly as a community.. for the "eyeballs". Acquisitions like this (for community/content), the Google Print project, etc are showing how Google is becoming more of a media company.

The question should be just how much Google can profit from YouTube, not whether it will or not. However, Google does have a history of letting things go stale (blogger).

on October 19, 2006 08:49 AM
# Eric said:

I don't think the point was missed - I think there was just a lot of disbelief at that point. Video has the potential to be a lot more lucrative than text based ads (see the price of TV commercials vs. magazine ads), but that's all it is right now, potential.

Simply, nobody has yet come up with a good way to monetize online video. YouTube is especially problematic because it can be assumed that their userbase will rebel if anything too intrusive is inserted into the experience.

Presumably Google has some ace up their sleeves here, and needed the inventory to try it out. They wouldn't have bought it if they didn't think they could make back the 1.6 Billion + operating expenses + potential legal expenses. But no one has any clue what that ace is, outside of Google. Which is why the angle was undercovered by bloggers. And until that ace is revealed, the deal does reek of the dotcom bubble.

Buying them vs. doing a deal does make a certain amount of sense if you presume they can monetize it. They just paid $900 million to MySpace for an ad deal, double what Fox paid for the site and presumably representing the lion's share of the ad revenues Google aims to get from that deal.

on October 19, 2006 09:36 AM
# Joseph Hunkins said:

We were reading different stuff because I think a lot of people made the eyeballs case. Many over stated the eyeballs case (as I think you are doing here), suggesting that YouTube was the top video site when in fact Yahoo does more video.

Others correctly noted it's NOT about eyeballs as much as it's about money and advertising market share. They are not interchangeable. Vids don't pay as well as contextual ads. If they did Yahoo would be doing spectacularly well right now.

I still think Scoble's right on to suggest this is about "building a moat" around Google. Comments supported by the Ballmer BusinessWeek interview. Google paid a huge premium for YouTube primarily to keep Yahoo and MS away.

on October 19, 2006 11:36 AM
# Joseph Hunkins said:

Whoops - I'm not finding Yahoo Video above YouTube at all in metrics I'm looking at now. I may be misquoting a misquote. Sorry.

on October 19, 2006 11:48 AM
# randomtruth said:

Not only did Google buy eyeballs, but they also bought themselves into the dominant position of longtail video content distribution. I.e., they now own the pole position for personal video publishing. And they did it all with funny money (all stock). $1.65B is approximately 1% of Google's market cap. That's a minor dilution that the market has already absorbed by rewarding the GOOG stock with a bump.

It was a brilliant speculative move played at just the right time, with little/no downside.

on October 19, 2006 12:28 PM
# josheli said:

Maybe you're reading the wrong things. Insulating yourself. Some people weres saying the acquisition was a smart move.
http://www.johnchow.com/index.php/why-it-make-sense-for-google-to-buy-youtube/


Also, Cal didn't write the following, Aaron Wormus did.

"The move to video is the only way that Google can continue itís growth as an advertising giant. They have saturated the Web space and need to provide other ways to provide advertising inventory to their clients."

on October 19, 2006 12:38 PM
# Cal Evans said:

Jeremy,

josheli is correct, Aaron Wormus wrote that, not me. I just found it relevant to the conversation.

=C+

on October 19, 2006 12:48 PM
# Aaron Wormus said:

Google is one of the few people who has the advertising reach that could fill YouTube's advertising inventory in any sane way. So the union makes a whole lot of sense even if it just means an expansion of the adword program to include in-video ads. We already know google is dabbling in TV ads: http://blogs.zdnet.com/Google/?p=18

Thanks Cal for pimping my rant ;)

on October 19, 2006 12:54 PM
# Miles said:

Seems to me that video is just as inherently harder to create ads on as graphical ads. Text ads are so easy to create that anyone can do it -- if someone devotes a day to writing 1 liners about a product, I'm sure they could create dozens of decent ads. Graphical are much harder -- a day spent creating graphical ads may yield 1 or 2 decent ads. Video ads are even harder, one person probably can't even create 1 decent ad in a day. Spend enough time on the yahoo site, and you see the same ads over and over. Watch an hour of TV, and you see the same ads over and over. Spend any time on Google, and it feels like you rarely see repeats (though I'm sure it happens).

on October 19, 2006 01:38 PM
# Ben Jhee said:

"People wrote about how the site is ugly, the technology sucks"

The arguments of jealous losers.

"the potential legal problems"

That one's gonna be a huge poison pill.

on October 19, 2006 02:20 PM
# Andrew Goodman said:

Jeremy, I'm so glad that Dave McClure got around to saying this by October 18. I'm sure glad however that I got it and said it on Octobers 6, 7, and 9, respectively. Inventory, yes. I know the title of my first post - "Need More Places to Put Ads, Need More Places to Put Ads" - was subtle. :)

http://www.traffick.com/2006/10/need-more-places-to-put-ads-need-more.asp
http://www.traffick.com/2006/10/pooh-pooh-tube.asp
http://www.traffick.com/2006/10/meet-google-worlds-largest-vc.asp

After that, we posted four lengthy posts about Yahoo's Panama, just to show we care about your advertising, too. :)

on October 19, 2006 11:26 PM
# John said:

Inventory is obvious. There is still the legal issue. Watch Universal sue Google/YouTube. They've started with Grouper, etc.

on October 20, 2006 12:19 AM
# Bharath R said:

btw, I'd like to see the look on the face of soothsayer Amr Awadallah after google & yahoo announced their numbers. Which division of yahoo does he work in? Crystal ball gazing? Anyways, here's a link for the wise guy - http://finance.google.com/group/google.finance.694653/browse_thread/thread/20739919f2f4c084
This will teach him to mind his business and not spread FUD about google.

on October 20, 2006 12:31 AM
# Aaron said:

John, old media is dying! Google is in the position where companies like Universal have the option to get with the program and create a licensing deal with GooTube or be sidelined.

If they were going to sue Youtube they would have done it already. YouTube has always been very willing to comply with legal issues, and as part of the aquisition Youtube is putting easy ways to detect and block copywrited material, so I don't think this is a big issue. Even if they do decide to sue it will just mean more publicity for GooTube.

on October 20, 2006 01:52 AM
# nick gogerty said:

anybody notice that the latest comscore metrics show the clips/user declining at YouTube.

http://nickgogerty.typepad.com/thoughts_for_now/2006/10/interesting_vid.html

How Sticky are those eyeballs...a classic 1999 rhetorical question.

on October 22, 2006 06:59 PM
# Thomas Hawk said:

Hey Jeremy I thought I'd check back in with you here in your comments as I hadn't heard back from you.

You state up in your post that it was a "cheap shot" for me to post on recent remarks by Yahoo's COO regarding the "monetization" (his word, not mine) of Flickr because I work for a competitor to Flickr (something very much disclosed).

You obviously write about Yahoo's competition frequently. In fact this post is about a competitor to Yahoo!. Although you add a smiley face when you say that you hope that Google is not too successful, I would assume that you obviously don't have a problem with people blogging about direct competitors.

So I've got two questions.

1. Why is it a "cheap shot" to reprint your COO's exact quotes and ask what might he meant by them vis a vis a named Yahoo property?

and

2. What exactly was meant by them (in your opinion)? How will/ought Yahoo monetize their social networks? Or did I read him wrong entirely?

I respect you a great deal which is why I ask for your opinion.

I actually think the "copy cat" comment was as much a cheap shot at Zooomr as anything. Zooomr is just two guys, a developer and a photographer, trying as hard as they can to make the best photo sharing site possible. We don't have the big budgets of Yahoo! but we work our asses off to try and roll out new features almost every week.

Does Zooomr contain functionality that is universal to photo sharing that Flickr also uses, even pioneered? Sure. But I think that nobody has a monopoly on using great photo sharing features. Which is why you don't hear me saying that Flickr copied Zooomr's geotagging when we came out with geotagging months before they did.

Certainly when Google came to market, their business was largely copying an existing technology (search) owned by Yahoo pretty much at the time and making it better. Was it wrong for Google to "copy" Yahoo, even down to the point of having two o's in their name?

So I'm not sure if your problem is with the fact that Zooomr contains many of the photo sharing features that are contained in Flickr (and many, many other photosharing sites), the fact that our name ends in an "R", or that you think that a competitor should not be allowed to question public remarks made by a COO of a business and industry that they work in and cover.

I certainly have been one of the most active bloggers blogging about Flickr over the course of the past two years. In fact, a quick Google search for "Thomas Hawk" flickr pulls up 373,000 results. That's about that's about 83,000 more than the 290,000 that come up for "Jeremy Zawodny" flickr.

Just hoping to get you to address the comment above and clarify your statement to me.

Thanks Pal.


on October 23, 2006 09:22 AM
# Jeremy Zawodny said:

(1) I called it a "cheap shot" because it felt like a cheap shot when I read it. It's really that simple. There's no evaluation process I went thru, dictionary I looked it up in, or higher power I contacted for guidance. I wrote what struck me. That's how I write most of the time.

(2) I think that was DanR's way of saying that social software is not immune from the way other on-line media works: First you build and audience, then you profit from that audience. Many "social" sites are still in the first phase, but that won't last forever. And hopefully Yahoo will be part of second phase.

on October 26, 2006 11:23 AM
# Adrian Lee said:

Weird, different worlds and all that. None of the people I spoke to or read about the buyout suggested they thought it was a bad move.

Everyone I came into contact with thought "wow, cool for both companies". it's lots of money, but it's a site serving 120million videos a day.
It's a site that does what it says on the tin, and well. You go to watch a video, it works, it gives you the HTML code to put on your own site/blog etc....

Is it the prettiest site ever? no
Does that matter? no
If you think it does, you don't 'get it', and are one of the people who think design is purely about flashy colours and effects, and nothing about functionality and layout.

I didn't think of the whole "more places to stuff ads" thing. But I, and many others, still think the purchase is a good one. YouTube certainly beats Google Video in functionality.

on November 2, 2006 09:19 AM
# Emad Hassan kenona said:

I am very glad because google buy youtube and we can make profit,i hope google buy Nasdaq

on May 1, 2007 09:49 AM
# Emad Hassan kenona said:

Google is great encycopedia of science and enlightened multiculture and huge informations at the present and the coming future.
Really google imigination science and hope of nations for the next millinium and cotrol the global because it eighth prodigy.

on May 16, 2008 06:31 AM
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