Friday, October 13, 2006


I love this digital services industry ….. in the time that it has taken for most major corporations to get through a “strategic planning cycle” we have seen a new company be born, one of the worlds top entertainment destinations created and the business then sold for US$1.65 billion (that’s A$2.215 billion at today’s exchange rate). Of course, I am talking about You Tube – a site which relies on mankind’s voyeuristic inclination – and clearly MILLIONS of people want to either view or be viewed.

This thing is a juggernaut of consumer generated (and sometimes consumer purloined) content. Everywhere I look for information about the growth, use and take up of You Tube, the story is the same. Our friends at Neilsen/Netratings have reported that traffic to You Tube grew by 297% in the first half of 2006. In the WEEK of 16th July 2006, more than 12,000,000 people visited the site and stayed on average 28 minutes (up from 17 minutes a visit six months prior) and page views are through the roof. These people (20% more likely to be men) are visiting more often, spending more time and viewing much more content. The ability to “build your own entertainment” is a very strong proposition for consumers and the You Tube story shows this to be the case.

So what doe this deal mean? It means that Google has pulled another coup (like MySpace). You can spend a lot of time analysing the complex valuation dynamics of the estimated net present value of the future income streams based on a wide range of variables… or you can just “get it” – GOOGLE GOES WHERE THE EYEBALLS ARE.

In simple terms, YouTube is one of the internet’s most visited sites, and so is MySpace and so is Google – I tried to quickly find some reliable stats for October, but the traffic to these three sites (including their mail services) now seems to be over 10% of all internet traffic. That is a LOT of eyeballs!

Even more interesting is the flow of traffic between these sites. MySpace is YouTube’s most important source for traffic, with internet traffic monitor Hitwise reporting that MySpace has accounted for 16.2% of YouTube’s upstream traffic. Given that Google has just prepaid US$900m for search advertising on MySpace, that is traffic that Google would have been happier to see stay on MySpace. Google has bought more of this “traffic loop” giving them more penetration into the flow of internet traffic.

Finally, You Tube has been killing Google Video in the video search stakes – the graph at left from our friends at Hitwise highlights by just how much. Given that we all expect to see some big increases in video search as bandwith increases and rich media devices become more prolific, this investment gives them an amazing head start in this race.

IMAGE SOURCE: Hitwise Pty Limited -

I love this stuff... because we are changing the world!

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