Google Acquires YouTube

Google Buys YouTube amid Analysts’ Concerns

by Yaroslav Lyssenko

[ 10/11/2006 | 01:20 PM ]

Google, the world’s largest search engine, has announced that it had agreed to acquire YouTube, the consumer media company for people to watch and share original videos through the Web, for $1.65 billion in a stock-for-stock transaction. The move will allow Google to boost its business associated with video sharing or selling, particularly, Google Video project.

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Following the acquisition, YouTube will operate independently to “preserve its successful brand and passionate community”. The official statement from both companies reads that the combined companies “will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos,” and will also offer new opportunities “for professional content owners” to distribute their work “to reach new audiences”, something, which may indicate that Google is looking forward to create a large online video store.

But not everyone within the industry are positive about the acquisition and YouTube’s independent future. Last week, Josh Bernoff and Ted Schadler, analysts for Forrester Research, wrote in their blog that when YouTube gets sued, it will lose because of the copyright issues that have plagued video-sharing site since its official launch almost two years ago.

Cnet News.com reports that yet another Internet research firm has predicted doom for YouTube’s business model.

“Lawsuits will trigger a chain reaction, according to the analysts, in which YouTube will be forced to remove all copyrighted material-and that means excising most of the professionally made content. What’s left will leave YouTube with videos that are “a lot less interesting,” said the Forrester analysts.

The Forrester opinion comes three months after research firm IDC came to a similar conclusion and less than a week after HDNet founder Mark Cuban told a group of advertisers that “only a moron would buy YouTube.” Both Forrester and IDC research companies argue that YouTube will face the same battle fought and lost by file-sharing site Napster.

While most of the material on YouTube is homemade, meaning that the video’s creator is the same person who posts it to the site, the problem is that, some YouTube fans violate copyright law by sharing video of copyright material from movies, music videos and TV shows.

“It only takes one unhappy media company - Disney, Sony, CBS or News Corp. for example - to force the company’s hand. And the cases on this point, from Napster to Grokster at the Supreme Court, are clear,” added the analysts.

• Cnet News.com: Analysts Don’t Like YouTube’s Chances.