Google makes video play with YouTube buy

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StockRing: Google stock is rated as a ?Cautious Buy? on October 9, 2006

<img src=http://www.stockring.com/sr/images/google-yahoo.gif border=0 align=left alt="Google and yahoo, more of the same"> The latest rumors about Google buying YouTube for $1.6 Billion made me reconsider Google stock and try to understand the new Internet marketing strategy of this giant. We all know that Google makes its money when lots of consumers search for some products on the Internet and click on ads displayed by the company. Every time there is a click there is a fee that Google gets. So, the basic business goal that Google has right now is to direct more and more Web surfers to the pages where Google can display its ads. So far Google was trying to create such Web Hot Spots on its own hoping to create a popular product comparable to Google.com web site.



To accomplish this task the company hired a huge work force of about 8,000 people who are trying to create and improve Google products to give them away later for free to Web users. Gmail, Picasa, Google Maps, Google Finance, Google Video are all examples of such products. However, most of these efforts are not contributing at all or not enough to Google?s revenue compare to its original Search web site. The basic problem that Google faces is that nobody knows what would be tomorrow?s new hit thing on the Internet so that the company could start to build it today. If we look at the latest examples, web sites such as Facebook.com, YouTube.com and MySpace.com all came from nowhere and quickly became extremely popular and suddenly were in the list of top 10 most visited web sites? right next to Google. If Google could only predict what would be the next super popular trend on the web, it for sure could build a product better than most of its Startup competitors. However we all know that real mega stars of the Web such as Google, My Space, YouTube are super rare phenomena that is extremely hard to foresee and even harder to plan for.



The latest news from Google co-founder Sergey Brin that his company will stop creating new products and instead try to improve the old ones shows that the company changes its approach. Google management now has 35 different products on their hands but not one of them matches the success of the original Google.com web site. And this is understandable, because according to statistics Google.com was one of the hundreds of web sites that were trying to build search engines, but only Google became the real star. Unless you are developing hundreds of products your chances to strike gold like next Google are pretty slim and 35 different products is a good effort but not good enough from the probability point of view.



It looks like Google decided to change its Business development and marketing processes and stick to much more effective and quick revenue growth plan. The idea behind Google?s future growth is to make sure that Google ads are displayed on the majority of the top 10 consumer oriented web sites. There are 2 main ways to accomplish it. The first way is to try to strike an advertising deal with top web sites like Google did with MySpace.com. The second way is just simply buy the Web site and the company that owns it such as what is about to happened between Google and YouTube today. Luckily for Google it has about $10 billon in the bank to buy a few of such web sites. The second Buying approach is easier to execute but maybe expensive. However, it is one sure way for Google to grow its revenue and stay on top of its competitors who might not have enough cash to do the same.



In conclusion the latest Google move to buy YouTube gives new refreshed hopes to young entrepreneurs who dream of creating new popular Web based products and services for large number of consumers. The new formula for success is really simple: Create a web site or service that attracts a lot of Web surfers and makes them view many pages per visit. If your web site becomes super popular Google, Yahoo, or MSN would be interested in either acquiring you or striking an exclusive advertising deal worth millions. And since creation of such mega successful web sites is unpredictable process anybody can do it with enough effort, patience and creativity.

Posted by: stockring   Posted on: 10/09/06 You are currently: a Guest | Members login | Terms of Use

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