UPDATE (10/9/2006, 5.00pm EST):
It’s official!!! Google To Acquire YouTube for $1.65 Billion in
Stock. You can also
read more about it at TechCrunch, Scobleizer and YahooNews.

If
you really want to get more in-depth info, there is a Webcast and Conference
call happening right now (10/9): The company will host a conference call and
webcast at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) today to discuss the
acquisition.  To access the conference call, please dial 800-289-0572
domestic and 913-981-5543 internationally.  A replay of the call will be
available until midnight Monday, October 16 at 888-203-1112 domestically and
719-457-0820 internationally.  Confirmation code for the replay is 2260624.

OK, so GooTube is a terrible
name (let’s hope they don’t call it that), but in case you haven’t heard the buzz going around last week, WSJ and NY Times (both behind subscription “pay-walls”) recently reported that Google
is in the process of negotiating a deal to acquire the immensely popular
video-sharing site, YouTube, at a cost of $1.6 billion. That’s right folks…I said
billion.

For those who are not
WSJ/NYT subscribers, here are a few good write-ups on the matter…

- http://www.macworld.com/news/2006/10/06/youtube/index.php
- http://www.techcrunch.com/2006/10/09/will-googletube-be-announced-this-week/
- http://www.techcrunch.com/2006/10/09/google-youtube-sign-more-separate-deals/
- and many more here: http://www.techmeme.com/061006/p77

If you’re trying to make
some sense of this deal and whether it’s really worth it for Google, then you
need to read Charlene Li’s (Pricipal Analyst, Forrester) great blog post on what it means—here’s an
excerpt:

Why would Google buy YouTube? To start, 35 million
users in the US
and 100 million daily video views. But it’s not just the sheer numbers that
grabs Google’s attention. YouTube is a gem because it figured out what Google,
Yahoo!, MSN, AOL, and all of the other video players in the marketplace
couldn’t – that it’s not about the video. It’s really about the community
that’s around the video…

Is YouTube worth $1.6B? You betcha. That’s 4
cents per video stream ($1.6B divided by 100 million daily views * 365 days)
and it’s still growing. Another way to think of it is that YouTube has roughly
50 million users (35M in the US
according to Nielsen NetRatings, and probably another 15M worldwide) which
comes out to $32 per user. It’s high, but it’s also reasonable…

The real opportunity for
YouTube is to create a completely different kind of advertising form, one that
is based on community engagement and involvement, rather than the traditional
interruptive style of advertising. Take a look at their home page – here’s a
screenshot from today. There’s a small text link to a “Follow the Finger” video
contest sponsored by Butterfinger
(screenshot also included). Advertisers are loathed to develop these special
campaigns together – they would much rather slap on existing banners and
promotions. But given the size and attractiveness of the YouTube audience, the
site can command not only top dollar with exclusiveness, but also demand that
advertisers adhere to specific standards that guarantee the best user
experience.

Also, if those aren’t convincing
enough reasons, then just look at YouTube’s latest announcement:

YouTube announced on Monday partnerships with
Universal Music Group, Sony BMG Music Entertainment and CBS that let their
artists' music and videos be included in original content posted on YouTube's
site.

I’m
sure that would make the deal with Google just a little bit sweeter and little
bit weightier. In fact, there was already early speculation of what YouTube
could be worth back in August, when Sony acquired Grouper for a hefty
$65 million, so I guess the $1.6B figure for YouTube comes as not much of a
surprise to those who have been following these trends.

So
what does this all mean? Well, let’s just say virally-spread, online video sharing sites are hot-hot-hot at
the moment and traditional businesses are starting to leverage this technology (especially
with its roots so close to traditional media like TV) as a medium for
advertising, distribution, and attracting attention to their products and services.
And now that the 5 billion pound gorilla—Google—is planning on investing in this
resource, you can bet it will only get more and more popular.

Note: If you’re
interested in exploiting this medium and/or applying it to your business, then watch
this space later this week, as I’ll be blogging  about a recent talk I attended at Podcast Academy 4, where Tim
Street (warning: link to FrenchMaidTV.com),
spoke about “Viral
Video—The Secret To Spreading Your Content”.