Google to Yahoo and Microsoft: the $1.65 billion was worth it

Ahh, now you all understand what I meant when I said YouTube is a moat, not a revenue generator. By putting YouTube results into Google’s main engine Google ensures it will have better searches than Yahoo and Microsoft (who were, truth be told, getting damn close to matching Google’s quality). And it does it in a way that Yahoo and Microsoft will not be willing to match. Seriously, can you see an executive at Microsoft advocating putting YouTube videos into Microsoft’s search results? I can’t. That’d be the equivilent of sending traffic to a competitor. It’d be what I advocate at this point, but that explains why I am a stupid blogger and not some multi-millionaire executive.

Anyway, Google just distanced themselves from Yahoo and Microsoft. And they just provided a way to monetize YouTube videos.

I love Google’s strategy. It continues to mess with Microsoft’s strategy. Microsoft still treats each team as something that must make money. Google doesn’t do that. They didn’t care one bit that YouTube didn’t have any revenues. They knew that there’s other ways to make money off of YouTube than to force YouTube to monetize on its own.

Truth be told even I didn’t quite understand just what an impact that the YouTube purchase would have. It’s all very clear now. It also is even more worth putting up with billions of dollars of lawsuits.

If I were at Microsoft now I don’t know what I’d be advocating. Ray Ozzie really has his work cut out for him.

Google just put Microsoft’s Internet strategy in a box. It also explains why Microsoft has put so much effort into Silverlight lately (they need that to build a platform to get out of the box) and, might even explain why the lawyers are sabre rattling about open source. The execs at Microsoft don’t like being put into boxes. That isn’t a place they’ve ever been before.

If Google were playing chess I think they just said “check.”

And you wonder why the rest of the industry is talking about FOG (Fear of Google)?  Exactly.

98 thoughts on “Google to Yahoo and Microsoft: the $1.65 billion was worth it

  1. All this is pretty superfluous really, I mean, the internet is still only the internet at the end of the day. I’m sure most people have other uses for their computers than searching Google, Microsoft or whoever, I know I do. Besides, I think it’s high time that Microsoft et al stop trying to assume ownership of the internet, it’s rediculous. I also agree with Neal, who really cares if YouTube is returned in Google search results, I do hope Google give us the option to turn that ‘feature’ off.

  2. “Regarding everyone knowing that YouTube would be integrated into search. Hmmm, you must be reading different reports than I am (and I read a lot of blogs and journalists’ reports, so that’s saying a lot)”

    @Scoble, you might have missed Wired’s Interview with Google’s CEO.

    Here’s an excerpt that talks about search monetization with YouTube:

    Wired: You thought there was a good chance of litigation when you bought YouTube. The deal set aside $200 million to cover the cost of lawsuits. Why did you make the acquisition if you anticipated so much hassle?

    Schmidt: Because we think it’s fantastic. I mean, we really do think that the YouTube phenomenon is sustainable for many, many years. And the argument is simple: People are using videoclips everywhere. They’re sharing them. They’re building communities around them. YouTube’s traffic continues to grow rapidly. Video is something that we think is going to be embedded everywhere. And it makes sense, from Google’s perspective, to be the operator of the largest site that contains all that video.
    Obviously, we would like to include licensed, copyrighted content — legally — and then make money on it. But YouTube itself can pay off — and this is where the critics get it wrong — in simple searches. Because, remember, when you go to YouTube, you do a search. When you go to Google, you do a search. As we integrate those searches, which we’re working on, it will drive a lot of traffic to both places. So the trick, overall, is generating more searches, more uses of Google.

    Wired: Which generates more pageviews, which generates more ad revenue.

    Schmidt: You got it.

    Wired: Does that mean we will soon see video ads on YouTube?

    Schmidt: Absolutely. ……

    Read the rest at http://www.wired.com/techbiz/people/news/2007/04/mag_schmidt_qa

  3. “Regarding everyone knowing that YouTube would be integrated into search. Hmmm, you must be reading different reports than I am (and I read a lot of blogs and journalists’ reports, so that’s saying a lot)”

    @Scoble, you might have missed Wired’s Interview with Google’s CEO.

    Here’s an excerpt that talks about search monetization with YouTube:

    Wired: You thought there was a good chance of litigation when you bought YouTube. The deal set aside $200 million to cover the cost of lawsuits. Why did you make the acquisition if you anticipated so much hassle?

    Schmidt: Because we think it’s fantastic. I mean, we really do think that the YouTube phenomenon is sustainable for many, many years. And the argument is simple: People are using videoclips everywhere. They’re sharing them. They’re building communities around them. YouTube’s traffic continues to grow rapidly. Video is something that we think is going to be embedded everywhere. And it makes sense, from Google’s perspective, to be the operator of the largest site that contains all that video.
    Obviously, we would like to include licensed, copyrighted content — legally — and then make money on it. But YouTube itself can pay off — and this is where the critics get it wrong — in simple searches. Because, remember, when you go to YouTube, you do a search. When you go to Google, you do a search. As we integrate those searches, which we’re working on, it will drive a lot of traffic to both places. So the trick, overall, is generating more searches, more uses of Google.

    Wired: Which generates more pageviews, which generates more ad revenue.

    Schmidt: You got it.

    Wired: Does that mean we will soon see video ads on YouTube?

    Schmidt: Absolutely. ……

    Read the rest at http://www.wired.com/techbiz/people/news/2007/04/mag_schmidt_qa

  4. MS is doomed and they know it. They are now just another company that develops software. That’s it. No more, no less. There is nothing special about MS anymore.

    The future is open for freedom and open source and it’s about time. We need to follow the EU and be become very unfriendly towards software patents.

  5. MS is doomed and they know it. They are now just another company that develops software. That’s it. No more, no less. There is nothing special about MS anymore.

    The future is open for freedom and open source and it’s about time. We need to follow the EU and be become very unfriendly towards software patents.

  6. I agree with the comment about putting Microsoft in a box. How things change over time.

    Reminds me of the old joke (which I’ll mess up here I’m sure): “Granddad died peacefully in his sleep. The passengers in his car died screaming their heads off as he drove them off the cliff.”

    Vision is still one of the best assets with innovation I guess.

  7. I agree with the comment about putting Microsoft in a box. How things change over time.

    Reminds me of the old joke (which I’ll mess up here I’m sure): “Granddad died peacefully in his sleep. The passengers in his car died screaming their heads off as he drove them off the cliff.”

    Vision is still one of the best assets with innovation I guess.

  8. Do you think Microsoft will ever get on the curve?
    I think they will lag behind the trends in web for quite some time.

  9. @5:

    I think the box they are in is that they are still making money on their monopoly products, Windows and Office, both of which may have many years to go in making money.

    BUT, to interest Wall Street you have to show you have something new and exciting that could explode onto the market every few years. Microsoft has a dismal track record in this regard.

    What are the last three headlines concerning Microsoft/: Head lawyer threatens to sue everyone using Open Source; Head Open Source “guru” says much Open Source was stolen from MS; Bill Gates says the future computer will be the cell phone.

    While all of these positions are totally idiotic. Gates is a least PRETENDING to be forward thinking (and I guess that is his job now) by looking for a new revenue stream that is not dependant (at least necessarily so) on the existing monopoly.

    Seems to me like whoever is supposed to be actually running the company (and that would still be Ballmer wouldn’t it?) is letting the company run totally out of control.

    Reminds me of the old joke (which I’ll mess up here I’m sure): “Granddad died peacefully in his sleep. The passengers in his car died screaming their heads off as he drove them off the cliff.”

  10. @5:

    I think the box they are in is that they are still making money on their monopoly products, Windows and Office, both of which may have many years to go in making money.

    BUT, to interest Wall Street you have to show you have something new and exciting that could explode onto the market every few years. Microsoft has a dismal track record in this regard.

    What are the last three headlines concerning Microsoft/: Head lawyer threatens to sue everyone using Open Source; Head Open Source “guru” says much Open Source was stolen from MS; Bill Gates says the future computer will be the cell phone.

    While all of these positions are totally idiotic. Gates is a least PRETENDING to be forward thinking (and I guess that is his job now) by looking for a new revenue stream that is not dependant (at least necessarily so) on the existing monopoly.

    Seems to me like whoever is supposed to be actually running the company (and that would still be Ballmer wouldn’t it?) is letting the company run totally out of control.

    Reminds me of the old joke (which I’ll mess up here I’m sure): “Granddad died peacefully in his sleep. The passengers in his car died screaming their heads off as he drove them off the cliff.”

  11. Actually to add onto my last post, #11… Yahoo’s Alpha ALREADY lists results from YouTube. Maybe they’re not so quick to shy away from that as you think, Robert. :)

  12. Actually to add onto my last post, #11… Yahoo’s Alpha ALREADY lists results from YouTube. Maybe they’re not so quick to shy away from that as you think, Robert. :)

  13. Or maybe Google knows something about us that we don’t know. I’m sure they know a lot about me, my weaknesses, what links I click and what stuff I buy. And they saw something in Youtube that you and I cannot.

  14. Or maybe Google knows something about us that we don’t know. I’m sure they know a lot about me, my weaknesses, what links I click and what stuff I buy. And they saw something in Youtube that you and I cannot.

  15. All said is well and good. Google will still retain the title of the best search engine.

    I give the PPC industry 2-4 years. When that tanks, Google ( at least it’s market valuation and stock price) goes down with it.

  16. All said is well and good. Google will still retain the title of the best search engine.

    I give the PPC industry 2-4 years. When that tanks, Google ( at least it’s market valuation and stock price) goes down with it.

  17. >Seriously, can you see an executive at Microsoft advocating putting YouTube videos into Microsoft’s search results?

    Sorry to burst your bubble but YouTube, MySpace and Google Video results regularly show up in video search results on Live Search – examples include

    - http://search.live.com/video/results.aspx?q=curtis+camron&go.x=0&go.y=0&form=QBXR
    - http://search.live.com/video/results.aspx?q=youtube+star&go.x=0&go.y=0&form=QBXR
    - http://search.live.com/video/results.aspx?q=how+to+blog&go.x=0&go.y=0&form=QBXR

  18. >Seriously, can you see an executive at Microsoft advocating putting YouTube videos into Microsoft’s search results?

    Sorry to burst your bubble but YouTube, MySpace and Google Video results regularly show up in video search results on Live Search – examples include

    - http://search.live.com/video/results.aspx?q=curtis+camron&go.x=0&go.y=0&form=QBXR
    - http://search.live.com/video/results.aspx?q=youtube+star&go.x=0&go.y=0&form=QBXR
    - http://search.live.com/video/results.aspx?q=how+to+blog&go.x=0&go.y=0&form=QBXR

  19. Actually, if I were Yahoo or Microsoft, I will index YouTube video if I have the technology. If people are going to rival’s side for the video anyway, I would rather they come to my site first. This way I am in the loop and can do something remedy this bad(???) situation.

  20. Actually, if I were Yahoo or Microsoft, I will index YouTube video if I have the technology. If people are going to rival’s side for the video anyway, I would rather they come to my site first. This way I am in the loop and can do something remedy this bad(???) situation.

  21. “Seriously, can you see an executive at Microsoft advocating putting YouTube videos into Microsoft’s search results? I can’t. That’d be the equivilent of sending traffic to a competitor.”

    ..

    I don’t see why they wouldn’t. The #2 result for “search engine” at Yahoo! is Google. The #2 and #3 results at Live.com for “search engine” is Google.

    If your goal is to index information (and that should be a major part of any major search engine’s goal), then you can’t shy away from indexing all information just because a competitor creates it. Google isn’t shy about indexing Yahoo content (#1 result for “stocks” is Y! Finance, #2 result for “sports” is Y! Sports, etc.), why should Microsoft or Yahoo! be shy about indexing YouTube?

    If they’re serious about video search (and they probably should be), the answer is: they won’t be shy.

  22. “Seriously, can you see an executive at Microsoft advocating putting YouTube videos into Microsoft’s search results? I can’t. That’d be the equivilent of sending traffic to a competitor.”

    ..

    I don’t see why they wouldn’t. The #2 result for “search engine” at Yahoo! is Google. The #2 and #3 results at Live.com for “search engine” is Google.

    If your goal is to index information (and that should be a major part of any major search engine’s goal), then you can’t shy away from indexing all information just because a competitor creates it. Google isn’t shy about indexing Yahoo content (#1 result for “stocks” is Y! Finance, #2 result for “sports” is Y! Sports, etc.), why should Microsoft or Yahoo! be shy about indexing YouTube?

    If they’re serious about video search (and they probably should be), the answer is: they won’t be shy.

  23. That’s a funny opinion, Robert. Or is it my opinion that’s odd? When I read that Google was going to incorporate videos on their search page my first thought was “Crap, looks like I won’t be using Google any more.”

    I don’t give flying you know what about videos or YouTube and only know of one, teenaged, person that does.

    If videos start popping up in my Google search results, even just as text links adding to the noise, it’ll be like the proverbial straw that broke the camel’s back and drive me from using Google any more.

  24. That’s a funny opinion, Robert. Or is it my opinion that’s odd? When I read that Google was going to incorporate videos on their search page my first thought was “Crap, looks like I won’t be using Google any more.”

    I don’t give flying you know what about videos or YouTube and only know of one, teenaged, person that does.

    If videos start popping up in my Google search results, even just as text links adding to the noise, it’ll be like the proverbial straw that broke the camel’s back and drive me from using Google any more.

  25. Microsoft still treats each team as something that must make money.

    XBox and Zune don’t make money. Arguably the biggest (fixable) problem right now at MSFT is that too many teams are allowed to lose money. As long as cross-subsidization of money-losing products is allowed, the teams that produce them don’t have the same set of incentives that their competitors do to produce a great product.

    If the products were forced to stand on their own, those that could be improved to the point at which they could compete well in the marketplace would be, and those that were unredeemable failures would be dropped. Both outcomes would be good.

    Now, there may be some case to be made for cross-subsidization of products with zero marginal cost (e.g., giving away software like WMP or Adobe Reader, or your YouTube example). But having teams that build hardware (XBox, Zune, etc.) lose money year after year doesn’t make any business sense at all – it’s just a sign of a bloated, lazy company that is desperately trying to maintain share in too many markets.

  26. Microsoft still treats each team as something that must make money.

    XBox and Zune don’t make money. Arguably the biggest (fixable) problem right now at MSFT is that too many teams are allowed to lose money. As long as cross-subsidization of money-losing products is allowed, the teams that produce them don’t have the same set of incentives that their competitors do to produce a great product.

    If the products were forced to stand on their own, those that could be improved to the point at which they could compete well in the marketplace would be, and those that were unredeemable failures would be dropped. Both outcomes would be good.

    Now, there may be some case to be made for cross-subsidization of products with zero marginal cost (e.g., giving away software like WMP or Adobe Reader, or your YouTube example). But having teams that build hardware (XBox, Zune, etc.) lose money year after year doesn’t make any business sense at all – it’s just a sign of a bloated, lazy company that is desperately trying to maintain share in too many markets.

  27. “Implicit in that is “product teams.” ”

    here’s a list of free ‘shipping products’ in the developer space
    1) C++/C#/VB compilers
    2) .NET clr
    3) .NET libraries
    4) MFC/ATL libraries
    5) C/C++ libraries
    6) VS express editions (to some extent. There aren’t teams that just work on VS express)

    “YouTube would be integrated into search”
    Besides, what would this do the DMCA harboring that GOOG is hoping to use in its lawsuits? AFAIK you can’t monetize content and claim DMCA safe harboring…

  28. “Implicit in that is “product teams.” ”

    here’s a list of free ‘shipping products’ in the developer space
    1) C++/C#/VB compilers
    2) .NET clr
    3) .NET libraries
    4) MFC/ATL libraries
    5) C/C++ libraries
    6) VS express editions (to some extent. There aren’t teams that just work on VS express)

    “YouTube would be integrated into search”
    Besides, what would this do the DMCA harboring that GOOG is hoping to use in its lawsuits? AFAIK you can’t monetize content and claim DMCA safe harboring…


  29. Kermit: “The most idiotic statement I’ve seen from you, Scoble, and that’s saying a lot. Good grief, when you worked at Microsoft, did you actually have a clue as to what was going on there? I know that your technical knowledge is next to zero, but even you could see there are plenty of teams at MS that aren’t “must make money”. Hell, look at Microsoft Research itself, which you were praising awhile ago.”

    Sheesh. Time to turn on moderation, or maybe require real email addresses. It is a great compliment to your relevance that all these little voices keep whining about you.

    As a former MS drone, I understood exactly what you meant — they didn’t require that the cafeterias make money, or the landscaping crew, or the HR department. But if your BG wasn’t contributing, you got hind teat and no respect. And you usually got a new VP pretty quickly.


  30. Kermit: “The most idiotic statement I’ve seen from you, Scoble, and that’s saying a lot. Good grief, when you worked at Microsoft, did you actually have a clue as to what was going on there? I know that your technical knowledge is next to zero, but even you could see there are plenty of teams at MS that aren’t “must make money”. Hell, look at Microsoft Research itself, which you were praising awhile ago.”

    Sheesh. Time to turn on moderation, or maybe require real email addresses. It is a great compliment to your relevance that all these little voices keep whining about you.

    As a former MS drone, I understood exactly what you meant — they didn’t require that the cafeterias make money, or the landscaping crew, or the HR department. But if your BG wasn’t contributing, you got hind teat and no respect. And you usually got a new VP pretty quickly.

  31. >I know that your technical knowledge is next to zero, but even you could see there are plenty of teams at MS that aren’t “must make money”.

    Implicit in that is “product teams.” Research and Support teams aren’t included in that. Does Research ship completed products or services for you to use? Not really (they do ship some things, but really they are more proof of concepts than things that have totally been productized and certainly you don’t see Research labs kinds of things on Live.com yet for the most part). Of course there are exceptions, but the exceptions are far and few between where at Google they are almost everywhere (out of all of Google’s products how many are making money? Not many).

    Regarding everyone knowing that YouTube would be integrated into search. Hmmm, you must be reading different reports than I am (and I read a lot of blogs and journalists’ reports, so that’s saying a lot). Most people couldn’t believe that YouTube was worth the price. I don’t remember anyone saying that the price was worth it because they would integrate YouTube videos into the main search, which would keep Microsoft and Yahoo’s quality from matching Google’s.

    Maybe I’m reading the wrong blogs, though.

  32. >I know that your technical knowledge is next to zero, but even you could see there are plenty of teams at MS that aren’t “must make money”.

    Implicit in that is “product teams.” Research and Support teams aren’t included in that. Does Research ship completed products or services for you to use? Not really (they do ship some things, but really they are more proof of concepts than things that have totally been productized and certainly you don’t see Research labs kinds of things on Live.com yet for the most part). Of course there are exceptions, but the exceptions are far and few between where at Google they are almost everywhere (out of all of Google’s products how many are making money? Not many).

    Regarding everyone knowing that YouTube would be integrated into search. Hmmm, you must be reading different reports than I am (and I read a lot of blogs and journalists’ reports, so that’s saying a lot). Most people couldn’t believe that YouTube was worth the price. I don’t remember anyone saying that the price was worth it because they would integrate YouTube videos into the main search, which would keep Microsoft and Yahoo’s quality from matching Google’s.

    Maybe I’m reading the wrong blogs, though.

  33. How does the MS interal tech support group make money? How does the C9 group that you were a part of make money? What other groups inside MS are supposed to be making money according to Robert that aren’t?
    And is this whole Universal search a new idea? Everyone knew that it would come when news.google.com or images.google.com or video.google.com or whatever.google.com started that one day from the main search you would be able to search everything.

  34. How does the MS interal tech support group make money? How does the C9 group that you were a part of make money? What other groups inside MS are supposed to be making money according to Robert that aren’t?
    And is this whole Universal search a new idea? Everyone knew that it would come when news.google.com or images.google.com or video.google.com or whatever.google.com started that one day from the main search you would be able to search everything.

  35. I’m confused as to why you think Silverlight is Microsoft trying to get out of a box? It seems completely anti to that goal; producing a new closed and proprietary platform does nothing at all for their ability to interoperate with other web applications, be they partnerships or acquisitions.

    What do you have in mind?

  36. I’m confused as to why you think Silverlight is Microsoft trying to get out of a box? It seems completely anti to that goal; producing a new closed and proprietary platform does nothing at all for their ability to interoperate with other web applications, be they partnerships or acquisitions.

    What do you have in mind?

  37. BTW, I thought everyone *knew* that Google was going to merge search results from its own sites with results from the the general web. Seems that Scoble was the only one clueless as to this. And this, despite Scoble spending so much time at Google’s office brown-nosing them. After all that, you didn’t get a clue as to what they were actually doing? Well, you didn’t have a clue what Microsoft did when you actually worked there (evidenced by your “all teams must make money” malarky), so it’s not a surprise.

    BTW, Microsoft and Yahoo already do include YouTube in their search results. Do a search on ‘obama letterman’ (not quoted together) and see the first result that comes up using either search engine.

  38. BTW, I thought everyone *knew* that Google was going to merge search results from its own sites with results from the the general web. Seems that Scoble was the only one clueless as to this. And this, despite Scoble spending so much time at Google’s office brown-nosing them. After all that, you didn’t get a clue as to what they were actually doing? Well, you didn’t have a clue what Microsoft did when you actually worked there (evidenced by your “all teams must make money” malarky), so it’s not a surprise.

    BTW, Microsoft and Yahoo already do include YouTube in their search results. Do a search on ‘obama letterman’ (not quoted together) and see the first result that comes up using either search engine.

  39. “Microsoft still treats each team as something that must make money.”

    The most idiotic statement I’ve seen from you, Scoble, and that’s saying a lot. Good grief, when you worked at Microsoft, did you actually have a clue as to what was going on there? I know that your technical knowledge is next to zero, but even you could see there are plenty of teams at MS that aren’t “must make money”. Hell, look at Microsoft Research itself, which you were praising awhile ago.

  40. “Microsoft still treats each team as something that must make money.”

    The most idiotic statement I’ve seen from you, Scoble, and that’s saying a lot. Good grief, when you worked at Microsoft, did you actually have a clue as to what was going on there? I know that your technical knowledge is next to zero, but even you could see there are plenty of teams at MS that aren’t “must make money”. Hell, look at Microsoft Research itself, which you were praising awhile ago.

  41. >Microsoft still treats each team as something that must make money.

    I’m really confounded as to why you would claim this. There are plenty of teams at MS that don’t have revenue and are not expected to be revenue generators, but have strategic purpose.
    What is the revenue model for the Avalon team? WWF? VS Express editions? Countless others…

  42. >Microsoft still treats each team as something that must make money.

    I’m really confounded as to why you would claim this. There are plenty of teams at MS that don’t have revenue and are not expected to be revenue generators, but have strategic purpose.
    What is the revenue model for the Avalon team? WWF? VS Express editions? Countless others…

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