By Forrester Research
Special to CNET News.com
October 10, 2006, 2:00PM PT
By Josh Bernoff and Brian Haven
Google's purchase of user-generated video site YouTube for $1.65 billion in stock is a massive demonstration of the power of social computing.
The search giant already has the No. 3 video site, but now it will own a networking platform that makes video stickier--and better for advertisers.
To make this huge purchase worthwhile, Google must move rapidly to do three things: first, address the problem of users uploading copyrighted content; second, encourage marketers to think beyond traditional video advertisements; and third, maintain YouTube's excellent video selection and viewing experience.
Google's video site hosts more than 1.5 million videos, but the people who submit them are nearly invisible. By contrast, YouTube's site lets visitors rate videos, save them as favorites, comment on them, share them, see related videos and view other users' playlists, creating the largest and most active video community on the Web.
So. Here's what comes next:
Google must solve the lawsuit problem. By itself, YouTube waslike bits of TV shows and music videos. Now those same content owners' lawyers will take aim at Google's cash.
To fend off these lawsuits, the company must do several things. First, it must build on YouTube's new content ID system, which automatically identifies some copyrighted content. Second, it needs to make deals with content owners to share revenue from their uploaded content.
This is a trend that has already started; Google and YouTube havefrom companies like CBS, Universal Music Group and Warner Music. Google should also use its other services to tighten relationships with these content owners, as it has already done with News Corp. and its MySpace.com.
Marketers should begin to embrace social video. Marketers are already learning that they must connect with customers in the social-computing arena; online video is the latest contender. But marketers face two key challenges: the fear ofand viewer backlash against ads that disrupt the video-viewing experience.
To address the first, Google and YouTube must develop a method to rate the offensiveness of a piece of content and then allow marketers with varying thresholds of comfort to decide what they will associate with (one possibility is that offensiveness ratings come from viewers).
To address the issue of ad backlash, Google should nurture YouTube's recently launched brand channel concept and continue to guide marketers into a new era of video advertising where they act more like content providers than advertisers.
Get ready for the social-video Web. The first 10 years of the Web were focused on text, graphics and pages. With broadband users popping past half of all online users, text is passe. The next generation of sites will be video-heavy, and users will be as much a part of the experience as the content. Get your ad agency's video production folks together with your word-of-mouth marketers--they're going to need to collaborate to invent tomorrow's Web experience.
© 2006, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.