Current events analysis and contemporary issues

¶ … Mills, Elinor & Greg Sandoval. (10 Oct 2006). "With YouTube, Google puts its

Competitors in a Jam." CNET News.com. Retrieved 3 Feb 2007 at http://news.com.com/With+YouTube%2C+Google+puts+its+competitors+in+a+jam/2100-1030_3-6124528.html

Recently, the Internet search engine behemoth Google was given permission by federal antitrust regulators to acquire the video-sharing site YouTube for $1.65 million. This action means that the top Internet search engine Google now owns the top online video service. YouTube has 45% share of the current video-sharing market, more than YouTube's top four competitors combined. Not only is this a tremendous market edge for Google against its leading competitors Yahoo and Microsoft in the fields of Internet domination, but it will cost Google very little to add YouTube to its online portfolio of services. In fact, "Google has the data centers that can help cut YouTube's prodigious bandwidth costs and is likely better equipped to solve technological hurdles related to filtering out copyright and pornography...Google has the infrastructure and bandwidth to drive down those costs, and Google has a way to monetize it...It produces an upside in revenue with no significant cost impact" for Google (Mills & Sandoval, 2006).

Furthermore, the social networking site MySpace also "Google pledges $900 million for MySpace honors -- Monday, Aug 7, 2006" has an advertising and search deal with Google and is ranked second for online video searches, with more than 20% market of its market share. "That's followed by Google Video (which will continue to exist after the YouTube deal is completed) with about 10% share," with Yahoo Video and MSN Video lagging behind with only a 6% share. "There doesn't seem to be an obvious property out there [in the online video market of user-generated content] for Yahoo or Microsoft to go after for an acquisition" (Mills & Sandoval, 2006).

Another problem with Yahoo or Microsoft seeking out a new property is that part of the advantage of being a first market mover in a new social technology, such as the Internet, is that once such a social hub is created, it is difficult to alter people's habits, and to encourage people to post their videos in other network places. Part of the pleasure of posting information is reading friends' comments. The Internet is about a conversation between users, and people have grown accustomed to posting their videos on YouTube for familiar users to see. The Internet market sector is already dominated only by a few competitors and the market has become even narrower with the growing omnipresence of Google in its information, social, and video components.

Interestingly, although Microsoft's Windows operating system has made it one of the most lucrative companies ever created, Microsoft has faltered in its attempts to gain a similar inroad into the Internet, either in the sphere of search engines, music sharing, or video. It is surely an understatement to observe: "Competitors who rely on the same setup as YouTube," said Heberger, "where it's all user-generated content, they might be in trouble facing a Google-YouTube team." (Mills & Sandoval, 2006)

The impact of the federal government upon economic behavior in this instance is clear -- there may have been grounds to contest the merger of Google and YouTube, especially as Google has its own video service already. The government's action or inaction has changed the future of the Internet. Moreover, although the market structure of providers is relatively concentrated, the social diversity of the users of the services of Google and YouTube is unprecedented. Every person's lives are affected, provided they use the Internet

What is the downside for Google? On one hand, people could begin to lose interest in posting on YouTube, as YouTube is not a strictly essential service, like a business' use of a computer mainframe like Windows. "Baked into all these predictions are the assumption that online video really is the next big thing in Internet content and that its popularity can translate into advertising sales. Certainly, Google's executives think that's the case and were willing to spend big on YouTube, despite having their own video service and a reputation for steering clear of major acquisitions," and banking on the continued ubiquity of YouTube and its synonymous nature with shared, online video content (Mills & Sandoval, 2006). "This is the first time in history where people can shoot, edit and distribute videos," and the technology is so new, the wave of public interest, industry insides speculate, is still cresting (Mills & Sandoval, 2006).