Novice Investing - Watch Your Back, You Tube

Date: Monday 01st 2008f December 2008 05:19:55 PM

Watch Your Back, You Tube - 08/09/2007

By: Novice Investing Staff

Back in October 2006, we question Google Inc. (GOOG) 's intention of acquiring video sharing startup YouTube. At the time, YouTube and video sharing service was the hottest game in town. It had an alexa ranking of 10. Fast forward one year later, YouTube is not the only talk in town but it still boasts an alexa ranking of 4 !!. Now, it has even more traffic than the hotly contested MySpace. Now, last year we mentioned of the pros and cons of YouTube and just as last year, it is still intact now.

Pro # 1: YouTube is the leading provider of video sharing services. Yes, it is still the insurmountable force of video sharing services with an alexa ranking of 4 just below yahoo, msn and google itself.

Pro # 2: If anyone can monetize YouTube traffic better, it is Google. Google does not breakdown its YouTube revenue but it had already provided revenue sharing services with authors which will result in additional content, traffic and eventually advertising revenue. So far, it hasn't happened yet.

Pro # 3: Video ad may fetch a better price per impression due to its interactivity. This is still true as video ad is more interactive and attractive to viewers, resulting in a higher price per impression.

Con # 1: Lawsuits for shared content. While YouTube has struck a deal with three major content labels; CBS, Universal Music Group and Sony BMG in the eve of the merger with Google, lawsuit threat still lurks. One of the biggest lawsuit coverage so far is suit thrown by Viacom Inc.

Con # 2: Expensive cost of hosting video content. While cost of hosting video content is down compared to last year, it is still higher than other types of hosting. YouTube hopes to utilize Google's massive amount of resources to spread the cost of its hosting among Google's fixed cost.

Con # 3: YouTube is a social networking site, in a sense. Just as the fallen friendster and now MySpace (who is losing ground to YouTube in Alexa ranking), YouTube is still a social networking site. The industry is evolving extremely fast depending on their service offerings and the social trend at that time. There is no guarantee YouTube is able to retain its leading position in the coming years.

For the most part, video sharing services like YouTube acts as a supplement of the whole business strategy. This is in part because of its entertainment nature that satisfies viewers during its spare time. Until YouTube can make its service more compulsory, it is hard for Google to justify YouTube's stand alone existence in its portfolio. How can YouTube make its existence more relevant to its viewers? A couple of things come to mind:

1. Video resume. You Tube can let job seekers post their video resume online and let potential employers post theirs too. Heck, why don't they make a whole new job section in You Tube, all based on video content.

2. Video portal - for various hobbies. For example, You Tube can open up various video theme based portals such as cooking, dance, sewing, gardening, gaming strategy, dating profiles etc. whose entire video content are generated by users.

END

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Google Inc. (GOOG) or any other securities.

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