Posts on quality, life, culture, the media, news & tech with a twist & a slice of Limey. I moved my blog to http://renaissancehambara.jp in December 2006, go there for the latest content.
Lots of people have talked about the new model that is being built with Google acquiring YouTube. Andy Kessler sees it as a sign of weakness, other people see it as a sign of strength. I think that it is the classic move of a monopoly. Google in some ways is like Microsoft circa 1999, the company has a product which has reached critical mass and more money than it can spend.
That's the reason why Google had to fight off being considered an investment fund recently by US regulators.
It's about that time that Wall Street would demand for cash returns to shareholders in the form of dividends from a normal company. But Google is structured in such a way that Wall Street's tub thumping doesn't matter. Instead Google can use the surplus of cash and highly valued stock to stay number one: like a certain router manufacturer I could name.
The cash stockpile is used as a barrier to entry and as a barrier to competition.
YouTube and the Dell deal could be seen as ways of edging competition out and not allowing them a toe hold in the online marketing space. By purchasing huge amounts of eyeballs using surplus cash it makes it harder for the likes of InterActiveCorp and Yahoo! to get a look-in.
What's more when InterActiveCorp or Yahoo! do enter the market for a new company they have to over pay, everyone knows what YouTube made, why should they be short changed? These companies aren't Google and that money comes at a higher price to their business.
When Yahoo! renegotiates with HP and Acer on distribution deals it will see its partners having Google's one billion USD deal with Dell in the back of their mind. Its not like Yahoo! is bringing anything but money to the table for these vendors, all the services from Search to instant messaging are available as part of the Windows OS anyway. Yahoo! also has to keep up in the Google arms race building data centres, with President Reagan's SDI initative to bankrupt the Soviet Union and bring the Politburo to the table being played out at a corporate level.
I am just waiting for Eric Schmidt to describe Yahoo! as the evil empire.
"When two tribes go to war, one is all that you can score" - Frankie Goes To Hollywood
Labels: business, google, media, yahoo