Rapid Graffiti

Google acquired YouTube for USD 1.65 billion.  YouTube is a popular video sharing site where users upload video and share them with friends and groups.  

Google already has a video service of its own.  So why did Google acquire YouTube? To improve its share in the video sharing market? Well…

Alexa, a subsidiary of Amazon.com, ranked YouTube as 10th most popular site on the internet.   YouTube had 34 million unique visitors in August 2006 according to Nielsen NetRatings.  Users create and upload their videos and invite friends to watch and share contents.  Sounds familiar? It actually is.

Let’s juxtapose Social Networking and YouTube:

• Content in social networking sites is created by the user, so is the case in YouTube.
• Users invite their friends on their social network; same is the case with YouTube.
• Popular revenue model for social networking sites is advertisements, and so is the case with YouTube (That was the case with YouTube till August 2006, later on it discontinued Google’s Adsense)

So why did Google acquire YouTube? Probably to improve its market share in social networking. 

Orkut is the SN site of Google, but orkut has users largely from Brazil (around 63.28%).  In order to succeed financially, a site needs large number of users from US, because they spend more than their Brazilian counterparts, and the opportunity (called the digital media universe) to advertise online for US users is 10 times that of Brazilian users (207,995,583 as compared to 20,957,659).  YouTube has a large number of US users.  There’s a possibility that orkut and YouTube are merged to create a huge SN site. 

Confused? Basically orkut is the SN site.  YouTube does the same thing.  Users create contents, and invite other users to view and share contents.  The only difference YouTube does this through videos, but at the base there are users.  If YouTube is merged with orkut, the user base would increase manifold.  YouTube users will continue to share videos but will have additional information like the profile, their album, etc.  For orkut users, life would remain the same and they would have an option of sharing videos. 

Why not facebook?

If Google wanted to increase share in SN, it would have as well acquired facebook, the number 2 SN site.  This has to do something with the revenue model.  Google acquired YouTube primarily because of the video sharing feature.  Video sharing can be a stepping stone for video and music distribution, which can be a source of revenue.  YouTube has already cut deals with Universal Music Group, Sony BMG Music Entertainment and CBS for revenue sharing earned by these media groups’ contents. 
After all, even myspace is going for music distribution for revenues.  Hence, by selecting YouTube, Google is addressing the issue of SN market share and revenues. 

What happens now?

YouTube continues to function independently for some time.  When the time is right, Google might merge YouTube with orkut (the way it merged writely with spreadsheets) to create a big, very big social networking site. 

Yahoo and MSN are already feeling the pressure to make a dent in the SN space.  Yahoo might acquire facebook for something like $1 billion.  It currently has its own video sharing site.  MSN has launched soapbox, its own video sharing site.  It is also working on Wallop, the social networking site, which is flash based and has an exciting interface.

It would be interesting to watch the social networking space in the near future. 

Wat say?