Google has to grow up after YouTube deal

On the surface, the Google decision to buy YouTube looks just like NewsCorp’s purchase of MySpace and Yahoo!’s mooted interest in buying Facebook – a big company spending heavily to buy it’s way into the latest online craze, and worrying about the profits and costs for another day.

But the implications for Google’s Sergey Brin and Larry Page are much greater than such deals are for either Rupert Murdoch or Jerry Yang and represent a fundamental shift in how the company needs to act.

News Corp has made its investment work through doing two things. It sold the exclusive search advertising rights to (surprise, surprise) Google for more than the purchase price. That’s good for starters, but for the deal to be regarded as a smart move in the long-term it had to move beyond that. Luckily News Corp has loads of content to sell through the site, from its TV networks and movie studios.

Google doesn’t own any content which it can sell through YouTube and, in the meantime, has no advertising model to pay for the hugely expensive bandwidth costs of the business either.

Getting the content and the advertising could prove hard. Content owners could prove unwilling to put up legitimate content when so much of their own programming is already up there in pirated form. And the inherent difficulties of advertising sitting alongside the porn on the site has been closely tracked by the blog for some time.

So Google faces the tricky balancing act of cleaning up the site enough to keep partners and advertisers happy, but not to such an extent that it drives the vast audience elsewhere, where the content is unhindered by morals or lawsuits.

In essence Google needs to start acting like a traditional media company.

But, as the chief executive of, Jim Lanzone, recently pointed out, big online brands struggle to be known for more than one thing; thus Google’s struggle to build up any of its non-search businesses, whether e-mail, telephony or word processing.

By this reckoning News Corp turning MySpace into an outlet for its media content makes sense – it means the website can almost act like a television network. Yahoo! too has always seen itself as a media company more than a technology one.

For Google there’s no such easy route to follow. Until now it has happily portrayed itself as the home of rich technology geeks. If the YouTube deal is to succeed that needs to change, perhaps more than it bargained for when it bought the business.


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