Web grows around Google giant

Pricey YouTube deal has cemented search engine's dominant role, writes Karlin Lillington

They are the upstarts of the post-dotcom era: Google and YouTube. Both were founded by a pair of ridiculously young entrepreneurs with brains and a good idea and their companies have made them exceedingly wealthy while still fledgling geeklets.

Both were seemingly unknown one day, then all everyone was talking about the next. Both have had huge valuations despite the lessons learned after the dotcom crash. Both have fanatical devotees and crabby detractors. And both are proof that having a silly name won't harm your chances of success in the internet world - with YouTube winning hands down as the name you feel most stupid saying out loud.

Now, following Google's much discussed and breathtaking $1.6 billion (€1.31 billion) acquisition of YouTube, the twain are one. What does it mean, does it matter at all, and should we care?

What it means, according to Google, is that "the combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience".

Eric Schmidt, Google's chief executive, said: "The YouTube team has built an exciting and powerful media platform that complements Google's mission to organise the world's information and make it universally accessible and useful."

What it really means, though, is that Google has swallowed up yet another multimedia piece on the road to becoming a formidable player in the entertainment and what is called the 'Web 2.0' space - the second generation web made up of lots of content we users create, upload, download and share.

Google IS media convergence. Using Google or its affiliated companies and services, you can search for information and be fed advertising that is matched to those searches - and therefore what you seem to be interested in at the moment you are interested in it.

You can use Gmail email services, create your weblog though Blogger, post your pictures to Picasa and now, your videos to YouTube, and post and link to them all, again, through your Blogger blog. You can use Google Adsense to earn a little money from your blog. You can compose your documents online using Google's Writely and store them there. You can create free mailing lists and discussion groups. You can . . . well, you get the idea.

Looking at this big picture - and some (among them Microsoft, Yahoo and News Corp) would say worryingly so - you can see why all this matters to Google. It is becoming the dominant player across numerous areas with interlinked services and features that make it increasingly compelling to stay with Google as their home internet base and playground.

YouTube fills a hole that the internet world, much less Google, didn't even know it had two years ago.

Not quite enough people had broadband then, enabling them to share video rather than just pictures - which, in any case could use up your entire Yahoo or Hotmail space allocation, or make your e-mail program crash, due to the sheer size of the file. That's how fast the web changes.

At $1.6 billion, YouTube might seem a tad expensive, but Google has deep pockets and apparently was bidding against rival Yahoo up to the last minute. For the internet's giants, making the right move to cement a domineering position makes cost irrelevant in the upside down, freakonomics web world.

Add to that, the news that emerged just prior to their love-in that both had clinched a number of independent agreements with major music labels to offer music videos, and you begin to see what is going on.

During Google and YouTube's post-coital period, expect the two to be sorting out ways of dealing with some of the legal and copyright issues that were looming for YouTube. While valued at gazillions, YouTube didn't have the in-house money or clout to deal with the lawsuits that threatened to arise because users have a stubborn way of posting copyright content - music, films, music videos, TV programmes.

Sabres had already been rattled and, despite an acquiescent front from YouTube, managing the pirates was going to be tough. It still will be for Google, but the video deals are a start - offer the videos legitimately that everyone wants to watch and avoid a lot of the problems. And, of course, Google is very big, very powerful, has lots of lawyers in its back pockets, and is good at working deals.

On the other hand, analyst Bob Enderle takes an intriguing and slantwise view that includes Apple in the picture. YouTube is hardly the endgame as far as Google is concerned. Marry Google and Apple together and you'd have a media monolith in the very hot desktop space where, he writes, none of the current offerings in traditional TV, cable or on the desktop have provided fulfilment.

Will it happen? Well, who'd have thought we'd see Disney and Apple partnered, much less Steve Jobs back running Apple. And who'd have imagined two unlikely Stanford postgrads would have made a search engine the king of the web? And a video storage site with little revenue valued higher than some of the world's most venerable companies?

It's all to play for on the web in a game where we don't understand the rules or the players most of the time.

What could be more fun than to watch the action and see what comes next?