Does Google and YouTube Make Sense?

Techcrunch and the Wall St. Journal are both talking about a potential Google acquisition of YouTube for 1.6 billion. Before I comment further on this, let’s review a few things:

1. YouTube has been reportedly losing money due to bandwidth costs.

2. Much of YouTube’s use is driven by content it doesn’t own, and could potentially (and probably will be) sued for.

3. Much of it’s traffic and usage is driven by a competitor (Myspace) that could at any time block YouTube videos from being posted on its site, and people from Fox have made comments about making Myspace less of an enabler for other companies. That’d be a mistake on Myspace’s part in my opinion, but it doesn’t mean it wouldn’t badly hurt YouTube if they did it.

4. Google already has a competing service in Google Video.

5. Google normally buys small companies for their technology, not large established ones for insane amounts of cash.

Does that equal a 1.6 billion purchase?

However, of the likely companies to buy YouTube, Google would be able to handle the bandwidth costs and the possible legal issues the best as they are experts in both areas. They also have spent a lot of money on properties like AOL and Fox Interactive in order to secure advertising rights. This could be a similar move to assure that they get a lot of ad placement on YouTube, and it could possibly push them farther with video advertising.

I think the bottom line is that it would shock me if Google did this. The price is very high, and it just doesn’t seem like a Google type of deal.

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