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Maximiliano Leonardo 000133048

Youtube, Google, and the Rise of Internet Video

Introduction

YouTube is a video-sharing website, created by three former PayPal employees in February 2005, on which users can upload, view and share videos.
The company is based in San Bruno, California, it streams a wide variety of user-generated video content, including movie clips, TV clips, and musicvideos, as well as amateur content such as video blogging and short original videos. Individuals have uploaded most of the content on YouTube.
In November 2006, just a year and a half after being founded, YouTube was acquired by Google Inc. Nowadays they account for more than 4 times as many unique visitors as their closest competitor in the internet video market space. Even so Google and YouTubefaced the problem to prove Internet video as a successful business model in midst of the rapid emergence of competition in the video-sharing market and with Web trends being so volatile.
This work will analyze the Internet video industry as well as the Google and YouTube enterprises to determine the factors that could convert the Internet phenomenon into a profitable business without compromisingits leadership position.

The Internet Video Industry

Internet video had emerged as one of the hottest consumer technologies. The number of users using the Internet to watch videos increases everyday, since watching TV shows, news, movie trailers and music videos have become so accessible. The most popular type of Internet videos are User-Generated-Content. These are amateur videos of normalpeople taken with their camcorders, and are usually short clips. Since this is the most popular genre in Internet video, it is also obvious that three-fourths of the users have never paid to watch this content and have never reported interest in paying for it. Nevertheless marketers have taken notice of the popularity certain videos can get, and the new trend to stream professional contentexclusively on sites like YouTube or MySpace.
One of the growing trends in Internet video is VOD entertainment (Video on Demand). Internet video accounts for one third of VOD revenues nowadays, showing a huge growth since it accounted for less than 10% in 2006.

Company Analysis: YouTube and Google Video

Online Expansion

YouTube had become hands-down the most popular video-sharing Web site,where users could upload, view, and share video clips.
During the summer of 2006, YouTube was ranked the fifth most popular Web site by Web traffic–ranking service Alexa.com, with a growth rate far outpacing other popular new sites such as MySpace. It quickly became preeminent in the online video market. YouTube hosted more than 60 percent of all videos watched online and held 29 percent of the U.S.multimedia entertainment market.
In October 2006 Google announced the impending acquisition of YouTube for $1.65 billion. Google executives believed the deal would help transform their company into a global media powerhouse and provide new audiences for the targeted advertising that was the lifeblood of Google’s earnings. Google planned to retain YouTube as a stand-alone service whilecontinuing to nurture Google’s existing video service.
One year after the acquisition, Google Video was operating as a free video sharing and video search engine. Users could search and play uploaded videos directly from the Google Video site or download videos and remotely embed them in their Web pages and blogs. The site’s content consisted of an archive of freely searchable videos including amateurvideo, Internet video, advertisements, movie trailers, and commercial professional media such as televised content and movies.

The YouTube Phenomenon

As previously said, YouTube has become the video sharing monster, accounting for 490 million users worldwide (unique visitors per month). It generates an estimated 92 billion page views each month. It has generated a really loyal user base, in...
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