Google & YouTube: Match Made In Heaven?

Oct. 6 - KGO (KGO) -- It could be a $1.6 billion deal, and another sign the valley is springing back to life. In the same week the Dow hit a record high, a deal is in the works involving two well-known Bay Area sites -- Google and YouTube.

As best we can tell, negotiations are still underway. That's why neither company is talking or responding to phone calls. Google and YouTube are both Internet giants with well-known names.

What you're seeing unfold is a deal to expand their dominance and to deliver a huge audience to advertisers.

YouTube is where you go to watch a video that makes you laugh. It's where fans catch their favorite star's latest TV talk show appearance or where amateurs post their videos of everyday life, such as catching mom unaware beach go-ers are amused by her singing.

Google is said to be willing to pay $1.6 billion for YouTube. Considering that Google has $10 billion in cash, that's not only affordable, but also a strategic buy.

Molly Wood, CNETNews.com: "Companies spend millions of dollars, billions of dollars, just on marketing, trying to get the number of users that YouTube already has. So when you think about it that way, for Google, it is a good investment, and it probably is well worth the money to them."

Google has its own video site, but it's clearly not the leader YouTube is. YouTube had over 30 million users in July. That's three times more than Google Video and almost six times more than Yahoo Video.

However, YouTube has run into legal trouble because people have posted copyrighted material. One such lawsuit was filed over a video of the 1993 Reginald Denny beating in Los Angeles. The attorney for copyright owner, Bob Tur, says the case is still proceeding.

Jason Schultz is a staff attorney at the Electronic Frontier Foundation in San Francisco.

Jason Schultz, Electronic Frontier Foundation: "You need to respect the rights of copyright holders, but not so much that you restrict user access and freedom on the Internet. And I think Google has done a fairly good job of balancing that, and I think YouTube is headed in that direction as well, which is why they may be a good match."

YouTube has worked out deals with NBC and with Warner Music Group to pay royalties for copyrighted material. That's why you'll find video clips of Jay Leno on YouTube.

Google makes its money from Internet advertising, and analysts say YouTube has proven it can deliver millions of users' eyeballs to advertisers.

YouTube has several smaller competitors, such as Sausalito-based Grouper.com. Grouper already has been snapped up by Sony. The Google deal would be so big that it's likely to cause others to merge.

Sounds almost like dot-com is preparing for a comeback.

YouTube Phenomenon

Some interesting facts about YouTube:

• Founded in February of 2005 by three former employees of eBay's PayPal unit.
• Launched in December of last year.
• Has 25 employees.
• In July, more than 30 million people visited the site and those users watched more than 100 million vides a day.

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