YouTube, Google, and the Rise of Internet Video Case

1704 words 7 pages
YouTube, Google, and the Rise of Internet Video Case

The recent trends in Internet video have provided opportunities in the market. Although many companies attempted to capitalize on this market opening, many firms were not successful. Google was unable to get a strong presence in the market with their Google Video service until it purchased YouTube in 2006. Combined the companies now accounted for four times as many users as their closest competitor in the Internet video market (Cool, Seitz & Mestrits, 2010). Analyzing Google and YouTube will provide insight into the reasons some companies were more successful than others. This paper will explore why Google missed the Internet video opportunity, the evolution of the
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In November of 2007 Google celebrated the one year anniversary of acquiring YouTube by spending 1.65 billion in stocks. YouTube which was created Feb 15, 2005 by Chad Hurley, Steve Chen, and Jawed Kari continues to be the top video sharing website. The internet video domain which includes YouTube, Yahoo!, MySpace, etc., is dominated by user-generated content (UGC). UGCs consist of amateur video content such as web-cam, home video clips, or things recorded from a personal device by a nonprofessional. In 2006 YouTube claimed about 27% of the video market share and Google as a standalone only claimed 8%. What are the possible revenue models for YouTube? According to the eMarketers, the UGC revenues worldwide would grow to $8.175 billion by 2011 compared to the level of $1.6 billion in 2007. Over the next five years the growth rate for UGCs continued to be above 40%. Ads were initially priced during this time period $20 cost per thousand views (CPM). By taking the $20 CPM and multiplying it by the number of ads that are run today through YouTube which is 3.260 billion that would equal possible revenue of $65 billion. The key revenue drivers for YouTube are the number of video streams, the percentage with advertising, and the revenue per ad (CPM). Below is a chart that estimates the possible revenue of YouTube based upon CPM. According to the average cost for banner ad advertising can range from $200-30,000 for one month. YouTube’s


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