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Friday, October 06, 2006

Need More Places to Put Ads, Need More Places to Put Ads...

So if the rumor is true, and Google acquires Youtube... what about Yahoo and Facebook? And why the flurry of activity now? This would be out of character for, especially, Google -- who have generally made little acquisitions though recently they inked a huge "partnership" with MySpace.

Thoughts on Google-Youtube:

  • Probably the only reason this one falls through is price. $1.6 billion is clearly too much, on one hand, but it is also chump change to Google. So that's a wash.
  • They're likely haggling less over other details, because Google plans to roll Youtube users into whatever it wants (eventually, Google Video). It'll change the rules and operate its own system. This is going to be primarily a way of boosting Google Video to #1 in its category, quickly. Unfortunately for Google, Youtube's been getting all the attention, and with all that cash in the bank, waiting forever seems like a silly way to grow a business. Just go get those users.
So what about Yahoo-Facebook? Yahoo is eventually going to be wooing advertisers with its much-touted in-development Panama ad platform. But the advertiser community might be underwhelmed if that is not coupled with announcements about improving the quality and reach of Yahoo's online ad network. So, in spite of the nasty dilution it may cause to Yahoo stock, it would be an awful fate for Yahoo to slide into, say, 3rd place on advertisers' radar. I'll guess they push hard for the Facebook deal, and make one more large ($300 million plus) acquisition of content that works well with contextual ads, before year-end.

Finally, I'm going to go out on a crazy limb and predict that MySpace will eventually do the predictable thing and dwindle in the popular youth imagination. It's a pretty sophomoric, uninteresting place to be, and it will face competition. In that space, Google knows it failed badly with Orkut, for some reason -- perhaps because it was trying to show off that this was just sort of a "spare time project". Losing so badly here should be cause for Google to look in the mirror. And perhaps this is why they have decided to acquire YouTube, so it won't happen again. After all, Murdoch could buy it. :)

Posted by Andrew Goodman




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