Google+YouTube

Google’s YouTube gamble is vindicated
By Richard Waters in San Francisco Published: January 1 2010 18:27 | Last updated: January 1 2010 18:27 []
 * [[image:http://media.ft.com/cms/224b6d32-f725-11de-9fb5-00144feab49a.jpg width="470" height="285" align="left" caption="YouTube"]] ||
 * Linked in: YouTube proved to be increasingly popular ||
 * [|Google]**’s $1.65bn purchase of YouTube in 2006 was one of the boldest and riskiest deals of the decade. It was also the first, dramatic demonstration of Google’s relentless ambition to extend its reach into all corners of the web – even if that meant making powerful enemies along the way.

Coming only 18 months after the first video was uploaded to the site, the acquisition was part of a race in the middle of the decade to corner potentially massive new markets that were starting to open up on the internet.

A year before, **[|News Corp]** had grabbed early social networking leader MySpace, and the media group – as well as **[|Yahoo]** and **[|Microsoft]** – was also said to have approached YouTube.

Winning the race to acquire the web’s most popular video site, however, left Google with more than it had bargained for. Within weeks of the deal closing, it was on the receiving end of a $1bn lawsuit by media group **[|Viacom]** that claimed thousands of clips uploaded to the site infringed its copy­right.

Google’s hopes to quickly turn YouTube into the web’s main online video outlet were dashed by the wariness of other media companies who, having seen **[|Apple]**’s iTunes dominance of the music industry, balked at allowing too much control to a single player.

The acquisition has also brought three years of heavy red ink. Losses in 2009 have been variously estimated at anything between $170m and $470m.

Yet to judge by its share of the burgeoning online video market, YouTube has not disappointed.

The site’s share of web video viewing in the US has increased by 7 percentage points during the past two years to 38 per cent – even as the number of videos being viewed online each month has tripled.

That influence has also spread globally. YouTube says it now serves up more than 1bn video streams a day. External estimates suggest at least two thirds are viewed outside the US.

As a result, the site has become a touchstone for shifting social and political sensibilities, notably during Iran’s elections last year, when user-generated videos on YouTube became one of the prime sources of information about the unrest.

However, that global prominence has also resulted in some of Google’s trickiest challenges, forcing it to bow to censors in countries such as Turkey and China.

Google has now acted to take a firmer grip on the video unit and to push it faster along the road to profitability.

Co-founder Steve Chen has left YouTube for a position elsewhere in Google. Chad Hurley has ceded much of his control to one of Google’s most successful product managers: Salar Kamangar.

While Mr Hurley retains responsibility for overall direction of the site, Mr Kamangar runs content partnerships and monetisation. A spokesman said the two jointly run the business.

Eric Schmidt, Google’s chief executive, now says YouTube is finally on course to start to return some of Google’s investment – although he still will not say exactly when that day will come.