Google buyout heralds dawn of Internet TV
"This is the next step in the evolution of the Internet." That’s how Google’s chief executive officer Eric Schmidt summed up the significance of his company’s deal to pay $1.65 billion to acquire web video phenom YouTube.
To an outsider YouTube is a fledgling company, which is less than two years old and as far as anyone knows has yet to make a penny in profit.
However, Schmidt is known as one of the most canny guys around Silicon Valley, having guided Google to a market capitalisation of $132 billion while keeping everyone’s feet on the ground at the legendary Googleplex.
When Schmidt and Google’s co-founders Sergey Brin and Larry Page became convinced that YouTube represented a paradigm shift on the media landscape, they jumped at the opportunity as though the good old days of the dotcom boom were back.
And in a sense they are, except that this time the exuberance is slightly less irrational than in the late 1990s.
The Google triumvirate first made an offer for YouTube just last week, when they met YouTube’s founders Chad Hurley and Steve Chen – both in their 20s – at a modest diner in Silicon Valley.
Within days a deal had been hammered out, making the young duo the latest multimillionaire heroes of the web revolution. It also put Google in a prime position to emerge as the most important media company of the 21st century.
"Mass media – the grand media trend of the 20th century – is becoming personal media," noted Kevin Maney, a tech commentator for USA Today. "The Internet is making it possible for people to find and consume any song, TV programme, video or movie anytime they want."
If that strikes one as hyperbole, take a look at how US teenagers have been getting their television fix these past few months.
Most of the time you are unlikely to catch them slouched on the couch, channel surfing on the major networks as their ancestors did since the dawn of the television age. Nor will you run across them much on the hundreds of cable channels that are now piped in to most American homes.
Even when they do watch TV they are likely to record it on digital recorders or their PC media centres – skipping past the stale 30 second ads that are the basis of the capitalist media’s business model.
Instead they are clipping, tapping and poking away at their computers and cellphones, posting and watching videos on sites like YouTube and MySpace, reading comments of other users, and using the brilliantly simple user ratings system to guide their viewing habits.
How fast is this trend growing? Almost too fast to count. YouTube launched in the summer of 2005, and by January 2006 had 9.5 million unique visitors, according to ComScore. In August, that had grown to 72 million a month. To those users, YouTube is streaming more than 100 million videos a day.
The continued growth of broadband will accelerate this trend even further, yielding a bonanza for Google as it uses its sophisticated algorithms to insert brief ads that are relevant to the individual viewer.
Though some analysts have warned that YouTube could be vulnerable to lawsuits from copyright holders, deals with the likes of Universal Music and CBS – announced just hours before the mega deal – show that media companies increasingly see YouTube and its growing cadre of competitors as vital conduits to the younger generation.
"A lot of people are shocked by the $1.65-billion price," Dmitry Shapiro, founder of Veoh Networks, a YouTube competitor, told the San Jose Mercury News.
"But if you really understand what all of us are working on, we are creating a new medium called Internet television and that medium will be as compelling and as valuable as the medium of the of web itself."
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