www.nickhodge.com

So Google pur­chased You­Tube. US$1.65B in shares, paper-work money or an entry in an SEC filing.

In cold-hard num­bers: You­Tube has a repor­ted 100 mil­lion view­ers per day; based on the pur­chase price, each view equates to US$0.0452 over a year. Or, another way to look at it: as long as Google “earns” US5c for each pair of eye­balls for a few minutes, within a year it is fin­an­cially ahead.

Con­sid­er­ing the cur­rent cost of both text-advertising and TV advert­ising; and the oncom­ing onslaught from com­pet­it­ors such as Microsoft and Yahoo!, US5c per view seems rather attractive.

Oppor­tun­ity cost of not own­ing You­Tube: a com­pet­itor would have pur­chased it, first. Fox had already pur­chased the young Myspace eye­balls; and Microsoft is ser­i­ous about the online world and has all those XBoxen, Vis­tas, Zunes to cap­ture other eye­balls. You­Tube was obvi­ously on the block for sale, and each viewer is val­ued at US$0.0452. US$1.65B is not too much com­pared to a com­pet­itor get­ting the brand. You­Tube maybe the “text break­out” and single product weak­ness that dogged Google in recent months. (Robert Scoble has a per­spect­ive on this, too)

Look­ing into my crys­tal tube: Google’s Video Future: It is all about about the advert­ising. Poten­tial changes to Google Adsense:

• Text links inside an ad (trans­par­ent text on bot­tom); through to top+tail video or sound bytes
• Throw more smart maths at tech­no­logy to recog­nise the con­tent inside video and then attach appro­pri­ate a like advertisement
• The ori­ginal pub­lisher of you­tubes (another verb com­ing on, here?) self-categorises, so advert­ise­ments could sim­il­arly be targeted.
• For you­tubes pos­ted on blogs or other non-Google web sites; under­stand­ing the con­text would per­mit smarter tar­geted Adsense ads

Instead of crawl­ing the inter­net, Google is becom­ing the inter­net. This is rather a scar­ily thought that crossed my mind when read­ing this Wired art­icle (The Inform­a­tion Factor­ies) on their new data cen­ter in Wash­ing­ton state, US. Ulti­mately, it may have been cheaper to buy You­Tube than cre­ate a backing-store to hold indexed video and sound.

So next: watch Apple and Google. Not sale or pur­chase, just closer ties. Apple needs the con­tent, Google needs the hard­ware. Microsoft is the com­mon competitor.