Google's YouTube takeover - Q&As

Last Modified: 10 Oct 2006
By: Brendan Cole

Google is buying video-sharing website YouTube for $1.65bn (£883m) in shares after ferevered speculation. Here are some of the key questions and answers about the deal.

What is YouTube?

YouTube is a video sharing website set up in February 2005 by two internet entrepreneurs Chad Hurley and Steve Chen who came up with the idea at a dinner party.

YouTube's audience has soared from 2.8 million unique users one year ago to 72 million users in August 2006.

Around 100m videos are available on a given day, with 65,000 new videos added every day, according to the company's website. It cited numbers from Nielsen/NetRatings, claiming 20 million unique visitors per month.

Cripes. Why is it so darn popular?

Quite a few reasons. It all boils down to easier usability compared with alternatives like Google video.

Essentially, YouTube was constructed with a community in mind and its interface tools, such as tagging, a rating system, comments, friends, favourites, friends' favourites, go far beyond what Google Video provides for letting the community of users connect.

Arguably the brilliant seed of YouTube's model includes code for each user to play YouTube's videos directly from their own blog or website. Also, it is easier to search for video on YouTube where you can sort search returns by date added, title, view count and rating.

So if this is the future of TV, then £883m is a snip, right?

Well, not exactly. Critics say the website has yet to make any money, lacks a proper business model and all the hype smacks of the hypervalued internet companies of the late 90s that later crashed.

The main beef critics have though is that YouTube is a lawsuit waiting to happen. Critics maintain that the site is full of unauthorised clips from music videos, films and television programmes.

Some analysts have suggested that the only reason it has not attracted many lawsuits to date is that everybody knows it has little money to pay out.

Now that rich and powerful Google has entered the fray, critics think that lawyers are sharpening their knives like sushi chefs ready to carve up a big juicy salmon.

Really? Let the critics talk, what do they know?

Well the move has been criticised by some pretty big media players. Billionaire investor and dot-com veteran Mark Cuban had harsh words on Thursday for YouTube, saying only a "moron" would purchase the wildly popular start-up.

So what is YouTube doing about it?

YouTube announced partnerships with CBS, Sony BMG Music Group and Universal Music Group (UMG) that allow their artists' music and videos to be included in original video content posted on YouTube's website.

The deal will compensate the media groups and their artists for copyright-protected video and music posted on YouTube. The video-sharing site has also agreed to use new technology to filter out UMG content used on YouTube without permission.

Then how does YouTube make money?

YouTube now offers advertising through banner ads, promotions and sponsorships. It has said it plans to roll out a range of different advertising options over the coming year.

But Google has a track record on this count. When it first started, it was very successful in getting people to use it, but less adept at making money from it.

The search engine's founders Larry Page and Sergey Brin might see some kind of kinship with YouTube because Google, like YouTube, were successful early on in getting users to their site, but took a while to convert that to cash. They did so with very simple text ads.

It is unclear how Google would monetize their new business but one possibility is that users could be required to sit through brief advertisements before viewing certain clips; we will see.

In any case, it seems Google is betting that the site will provide an increasingly lucrative marketing hub as more viewers and advertisers migrate from television to the Internet.

Brass tacks time. What will the deal mean for users of both Google and YouTube?

It may mean Google will provide a sensible way of searching and navigating clips, and will hold out the prospect of paying owners of copyrighted material that finds its way onto YouTube.