Tuesday, October 10, 2006
Google buys YouTube
It sounds like the dotcom boom v2.0: Google today bought YouTube for 1.65 billion dollars. That is $33 for each of its 50 million users. Not bad for a company that was only founded last year and has never made a profit. If the whole Web 2.0 boom spectacularly crashes, at least this deal will be one of the often quoted examples.
Now you would think that as a blogger, I would be a fan of "user-created content", and thus a big supporter of the Web 2.0 idea. But unfortunately it isn't so easy. User-created content has the big disadvantage that you can't control it. So if you make money by displaying that content, you can well be held liable if this content is illegal or objectionable. People are adding 65,000 videos per day to YouTube, nobody would even be able to control all of these for appropriateness.
One often quoted problem is copyright. I just told how I watched the South Park World of Warcraft episode on Google video, where the admins couldn't take down the pirated copies of the film as fast as fans posted them. Now some copyright owners don't mind, but sooner or later one of them will sue, and we will end up with the Napster lawsuit all over again. Fact is that most internet users don't consider copyright violations as a crime, and will always flood video sites with copyrighted material of all kind. But the legal situation is much different, and YouTube might get shut down one day just like a multitude of file-sharing sites were before.
But even if there was only material without copyright, the ability of users to post what they want is problematic. Especially if you source of revenue is advertising, which is linked to the video's content. Extreme example (don't read this if you are easily offended): Some antisemitic neo-nazi posts a video of what he would like to do with the jews, and Google adsense places an advertisement for industrial gases next to it. You can be sure that the company who paid for the ad won't be pleased.
There are a lot of things you wouldn't be allowed to show on TV, starting with Janet Jackson's breast, jihadist or other extremist propaganda videos, extreme violence, porn, libel, and so on, and so on. So how would you prevent that sort of content to pop up on YouTube? Sooner or later some politician will find some objectionable content on YouTube, and start shouting for the site to be shut down.
And even if YouTube can survive indefinitely, it isn't sure whether it will still be the hottest thing around in a couple of years. It takes a while to recuperate 1.65 billion dollars, especially since the site isn't profitable yet. A link with the Google advertising business has obvious synergies, but the price might just have been too high. It seems people investing in technology have very short memories, wasn't the last dotcom crash just 5 years ago? I wouldn't buy Google shares right now.