The Pit - IMI Trust

The darling of the internet has bought the hype of the internet.  Google and You Tube unite!  The fallout of this is that Facebook, who was an acquisition target is now the red-hot favourite to be purchased by Yahoo who needs to make a strong movement in response to Google.  It’s like the turn of the century all over again. 

The question most people ask themselves when they heard about this potential deal, is why would Google invest US$1.6bn in a company which is a year old, has not made 1 cent in profit and has content that violates copyright law?

It doesn’t fit with the list of Google acquisitions to date.  Google had spent under US$150m in total over the past few years.  Pyra Labs (Blogger), Picasa, Writely, Keyhole (Google Earth), Sprinks (Contextual Ads in AdSense), Where 2 (Google Maps) as well as a whole host of semantic and analytical companies were acquired for practically nothing in comparison and have delivered massive value.  How can You Tube compete?

Goo-ba Tube-ing Jr Shouts ‘Show Me The Money’

Well it is simple really. Google has a market cap of around $130bn.  $1.6bn represents a small chunk of that company and the benefits far outweigh the negatives.  The impact on stock price alone should increase by more than the cost of the transaction.  1.5% is all the stock needs to increase by to make up that cost.   Of course, there are other reasons for the takeover. 

You Tube gets three times the traffic that Google Video does, and when people search on Google, they are looking for You Tube segments and not Google Video.

The CEO of Google Eric Schmidt, has announced that the purchase is in alignment with the Vision of the company for organising information.  Now from an entrepreneurial point of view, you have to take your hat off to the directors of You Tube. Co-founders Chad Hurley and Steve Chen has sold their company for US$1.6Bn within a year of launching their company. They have cashed in on the social media phenomenon.

Social Media seems to be the difference between the success of You Tube and Google Video. The ability to build a community around their service is one of the major factors behind the amazing success of this company. This success being defined by their 20m visitors to their website each month and 72.1m unique visitors per year. 

Rapport-building communication seems to be key when appealing to the masses.  Although these are huge numbers, you can take the principles of the You Tube and incorporate them into your business.

Once again to the bear and bulls in The Pit, look at how you can incorporate Social Media into your company structure.  In financial planning, communicating new offerings through a newsletter or a blog or a periodic podcast would have massive value and will draw in more people.  Accountants can communicate at crucial points of the year through these forms of media.  Engage your client base.  It’s called Social media for a reason.