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The Industry Weighs In!

Editor's Note: This article is part of our special series on Google's acquisition of YouTube, with commentary and analysis from practitioners and thought leaders throughout the industry, including:






Sifting through the responses, I tried to organize them along thematic grounds and ultimately gave up: What you see is organized alphabetically by the last name of my correspondent. You'll find riches all the way to the end, so keep reading!


David Berkowitz, Director of Strategic Planning, 360i
Google's acquisition of YouTube will change some of the rules of engagement for agencies involved with media buying.


The old rules (the ones in place today) were that marketers would turn to search marketing agencies, or whatever agency they've been using that offered search marketing services, to buy media through Google, and this would be predominantly text-based and direct response. Video-related ads would run through the client's interactive agency or rich media provider, and branding would be a primary goal.


Google has been blurring those lines for some time with image and video-in-banner ads, but as Google rolls out more formats specific to video, and to the viral user-generated content that has made YouTube its billion-dollar baby, those lines may disappear entirely.


Search marketing agencies will now be tasked with buying text and video ads and gaining more stewardship for achieving both direct response and branding goals, while agencies that have traditionally handled rich media and video will now work more closely with Google, giving them more leverage with the largest online advertising company.


Aaron Cohen, CEO, Bolt Media
Yesterday was an inflection point in media history. The great brands of the 20th century -- particularly ABC, CBS and NBC -- will find themselves increasingly marginalized by upstart, disruptive media ideas that grow huge audiences swiftly.


Those who said that YouTube would collapse under a mountain of lawsuits need to understand the changing dynamics of the media industry. We live in a radically more creative, more collaborative society.


A prediction on the next big merger: Yahoo! and Viacom.


Along the way you will see consolidation in the online video space. Companies to watch include Heavy, Break, Broadband Enterprises and Bolt.


Sarah Fay, President, Isobar U.S.
YouTube launched... what, a year and a half ago? And today it is worth more than $1.6 billion in the eyes of Google. If this doesn't illustrate the speed of change and the power of community then I don't know what....! I saw Chad Hurley just Friday, when he came to speak at our management conference in San Francisco. He didn't mention the deal of course, but he did look a little bleary eyed. He smiled a lot too, as he told the story of how YouTube got started. Do you know it wasn't developed against a business plan? Just some friends looking for a simple way to share videos with each other (okay a few genius friends who were from the founding team of PayPal-- but still!) Simplicity is the key-- YouTube is a simple, simple way to share videos. You don't need to sign in, you can share every which way-- just point, click, watch. And today they are up to 100 million views a day (they say they represent 57 percent of videos watched on the web). Astounding!


Is it worth $1.6 billion? Maybe so, given the parallels between search behavior and consumers' increasing inclination to access video on the web. Also, its a natural fit given the hand-in-glove relationship between the two-- search is the tool of choice in accessing video content (and in fact there has been a fruitful partnership between Google and YouTube-- until recently, Google Search was the primary way to reach the YouTube audience. I think its a fit-- the pairing of two ground-breaking behavioral behemoths.


One small thing-- the world will be watching to see how Google skirts the potential copywrite wars (now that there is a bigger wallet to go after).


Every big internet deal goes through five stages: rumor; shock; ridicule; curiosity; and envy. In eighteen months, other media companies will be envying Google for being willing and able to do the YouTube deal.


Jarvis Coffin, CEO, Burst Media
YouTube is not especially well-aligned with the notion of fast reliable search, the core value that made Google so successful after the start-up generation of search engines -- Yahoo, Excite, Lycos, Infoseek, Alta Vista -- decided to become portals. YouTube is content, and Google is in the content business now. There is no harm in that unless Google does not accept the transforming nature of this transaction to their business. Is it a technology company or a media company? $1.65 billion later it is a media company.


And, I'm off to launch a new search engine.


Adam Guild, President & CEO, Interep Interactive/Winstar Media
This deal will cause several things to happen. First, Fox will have to react swiftly to plug the hole YouTube may create on MySpace. Fox was not ready to buy YouTube because 80 percent of YouTube's traffic originated with MySpace-- so the duplication in unique users did not make sense to pay for.


It did make sense for a Google. Google just bought a lot of Fox Interactive users (smart). Remedy: Fox should buy a company like VMIX.com -- pound for pound as good technically as YouTube, but a start-up -- so Fox could get VMIX at a comparable bargain.


Fox will also have to watch themselves with Photobucket -- another company whose success they made via MySpace -- that will be the next to go.


For the industry, this move punctuates the value of the online community. MySpace was one of the first to get it right, and they tossed their nets wide.


Future communities will be locally focused and/or laser-focused on specific topics (e.g., herbalist.com will announce the launch of their community site at the end of this month), which will rival or complement local media like TV, radio and cable… if they can get their acts together.


It's all good. I love when interactive people kick ass!



That said, the penchant for acquiring eyeballs in a reactionary manner might have been a winning strategy for News Corp. with MySpace and a losing one for Viacom's Tom Freston-- but the jury is still out on whether there will be real long-term consumer currency with MySpace or YouTube.


Consumers, particularly the young fickle ones, consume and discard web destinations easily once "big brother" gets involved, so the challenge for Google will be how to use YouTube to enhance the limitations they have bringing national brand into search.


If they simply bolt/link it on as a video search tool, then it could well be an overpay for a "nice to have" additional video feature.


If they truly use it to link in and link out based on criteria other than pop appeal, then the contextual creative opportunities could be terrific.


Vikram Somaya, VP Strategic Development for Operative
Google has amazed observers and investors with its ability to take amorphous ad concepts and monetize them. With Search, they did it primarily by creating a simple-to-use marketplace that took all the operational hassle out of providing relevant, monetizable advertising on almost any site.


With this YouTube acquisition, Google seems to be trying to take their monetizing abilities even further. YouTube has been looking for the best ways to monetize their enormous and growing audience, so Google's competencies seem to marry perfectly with YouTube's.


The one thing that Yahoo has always had over Google is its community. But, with this acquisition Google suddenly has a growing, thriving community of its own that is characterized by very desirable demographics-- including high bandwidth. Buying this well-loved, no-cost social application is a slam dunk for them.


Kate Thorp, CEO, Real Girls Media Network
First a round of applause gentlemen! Not just for the price -- which I'm sure you now have all the analysts and reporters prepping their negative pieces about internet companies and Web 2.0 -- but for all the things you did not only well but at an amazing pace.


You started less than a year ago, February 2005 to be exact. You have only recently accelerated your staff to match your audience needs, still only 60 employees. A Web 1.0 company would have had 100-plus employees before they had traction, big difference!


So you haven't made money yet.


I'd like to see which startup has made money in the first 10 months while getting a product out, let alone a product that has set new records, defined a space for user-generated video and will undoubtedly re-write or strengthen the safe harbor legislation.


As for your acquirer, Google has so far allowed its companies to flourish. Besides getting a great legal team who has successfully held consumer privacy and searches at arms reach from the government, Google has allowed companies like Blogger and Baidu to thrive and fulfill their strategies.


Gal Trifon, CEO, Eyeblaster
The deal reflects Google's recognition that search dominance needs to be complemented with strong display and video capabilities to better seize the migration of budget away from traditional media. Additionally, given Google's unique free market/performance-oriented buying process, they are probably in the best position to monetize the inventory of YouTube that, so far, has been tricky for traditional markets to adopt due to the inconsistent nature of its content as well as the diversity of its audience.


From Eyeblaster's perspective, this deal further demonstrates the need for integrated platforms to enable marketers to deliver, track and optimize their campaigns across multiple media types, applications and channels.



Peter C. Horan, Chief Executive Officer, AllBusiness
Last week everyone was buzzing about the rumor that Google was trying to buy YouTube with the added benefit of an accurate price. (Leaking the price is a way for a buyer to test the waters of their shareholders' reaction to the deal.) When the deal was announced we quickly moved into shock and ridicule as the reality of a $1.65 billion price tag for an 18-month old company with no revenue and significant legal issues sunk in.



When the deal is done and the results start to come out, there will be a lot of curiosity about how it's working. When it becomes clear that this is the next big engine of Google's growth, there will be envy and regret for the other companies that didn't step up and do the deal. Doubt it? This week I've heard the MySpace deal described as cheap because they only paid $600 million for a company with no revenue. Just 18 months ago, I had people claiming that the New York Times was crazy for paying $410 million for About.com. Today people are saying it was a great deal. MySpace and About.com are just farther down the road. YouTube provides Google with direct access to tens of millions of users and billions of page turns at a reasonable price. In addition, YouTube fits in with the Google philosophy of leveraging technology rather than people to fuel growth. Google is already dealing with the major media owners on content issues. They'll now need to broaden the conversation.



The hardest task for any successful company is to keep compounding growth on top of big numbers. Google deserves our respect for taking bold steps to justify its shareholders' confidence in the company's future.


Editor's note: My own take on this deal is while the most obvious point of comparison is Fox's acquisition of MySpace, it's also important to remember Google's earlier acquisition of Blogger. What MySpace and YouTube give to readers is a sense of connection to each other. There is little substance in this connection -- it's akin to the kind of connection you feel with the people sitting next to you in a movie theater -- but even though the content is light the connection is still something that we crave as media consumers. Blogger allowed Google to profit from online communities that orbit individual voices. Now YouTube will enable Google to profit from online communities that don't have a center.


We'll continue to cover this story, and others like it, here at iMedia Connection.


Brad Berens is executive editor for iMedia Communications. Read full bio.



Tom Hespos, President, Underscore Marketing
Amid all the speculation, I was thinking that this would have been a much better strategic partnership than an acquisition. Even though it's an all-stock deal, I couldn't help but think the price paid was very high.


I thought that Google should have partnered with YouTube, providing a secondary social tagging mechanism and a way for YouTube videos to be easily located by Google Video Search, in exchange for a mechanism by which independent content providers and YouTube itself could profit from ad and sponsorship revenue. Of course, the terms and conditions for such a partnership would have had to address the copyright issue. In the end, though, I thought that the two companies could have easily worked together to build out a revenue model for YouTube. Such an arrangement also would have allowed YouTube to continue down the path of avoiding the pre-roll video ad model.


Today, I'm not so sure how YouTube will make money for Google. If Google is depending on ad revenue to pay for the YouTube acquisition, it begs the question of how a complex ad model can be addressed by Google's automated processes for selling advertising.


Of course, Google may have something up its sleeve already. I guess we'll soon find out.


Jeff Lanctot, Vice President and General Manager, Avenue A | Razorfish
With this deal Google has locked in the three biggest targets in the industry: AOL and Fox Interactive through partnerships and YouTube through acquisition. Regardless of the price paid, Yahoo, Ask.com and Microsoft must envy the triumvirate of deals Google has locked down.


Blogger, AdSense and YouTube have all been successful players in distributing and/or monetizing content. Video syndication is ready to take off, and that trio of services puts Google in a prime position when it does.


The industry hasn't seen a good water-cooler deal since Fox bought MySpace. Like that deal, the price tag for such a young company is what got people talking.


It's important to remember, though, that the $1.65 billion Google paid represents just over 1.3 percent of their market cap. While $1.65 billion is big for YouTube, it's pocket cash for Google. Google's current valuation allows them to make this deal with minimal risk to the business.


When thinking of search, where do most people go as a default? Google. When searching for video, what is the equivalent default? YouTube.


Google bought more than a website, they bought mindshare.


Dave Morgan, Chairman and Founder, TACODA
The acquisition of YouTube is a great deal for Google. It is their ticket to Madison Avenue, and besides, it gives them a critical audience and inventory growth engine in their battle for more audience versus Yahoo and Microsoft. Google has long talked about moving into the brand advertising space, but so far has lacked control of the kind of inventory that brand advertisers want. Now they have it.


YouTube gives them sight, sound and motion and a lot of audience. That's much more compelling to Madison Avenue and traditional brand advertisers than 25 words of text hanging off the bottom of a search or text content page, and nothing is growing faster now than social video.


I think that this will play out much like News Corp.'s MySpace deal. In another 12 months, all of the other big players will be kicking themselves that they didn't bid more.


Pirouz Nilforoush, Co-CEO, NetShelter, Inc.
On paper it looks like Google paid a hefty price to acquire the company. However, it will prove to be a brilliant move as it provides them with the level of video inventory required in order to capture significant ad dollars away from TV. Moving forward the biggest challenge will be monetizing the inventory, and that will largely depend on how they can create a safe environment where advertisers don't have to worry about damaging their brands by advertising on the site.


Brand protection is key.


Tony Quin, Founder and CEO, IQ Interactive
It was sort of poetic to see Mark Cuban say that only a moron would buy YouTube for $1.65 billion. It wasn't that long ago that he sold Broadcast.com, the last big video phenom, for $5.6 billion to Yahoo, then laughed all the way to the bank and beyond.


Of course, Cuban was referring to the potential copyright minefield that Google was walking into from all that lifted video and audio all over YouTube. But Eric Schmidt, CEO of Google, doesn't seem to be phased by the thought of lawsuits and is still raising the fair use flag.


A fair bet is that deep-pockets Google is fully prepared to prove its fair use doctrine in court and thus bolster its Pac-Man approach to getting content to feed its ad machine.


Of course, the bottom line is having more places to deliver Google's contextual ads, and at 100 million or so videos watched a day, YouTube has got plenty of avails.


Another thought is that this was also a defensive move at least for the short term, since it has been speculated that News Corp., Yahoo and Microsoft were circling YouTube.


Any way you slice it this is a great deal for Google since they bought YouTube for 100 percent stock.


A trusted advisor to companies of all sizes and a respected voice within the interactive media industry, Dr. Brad Berens has enjoyed a wide-ranging career that features storytelling as an organizing theme. These days, he divides his time among...

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