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Google Case Analysis

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Google Misses the Mark
There were many areas where Google may have missed the mark in the initial layout and design after its acquisition of You Tube. The first major mark Google missed was the initial design of the video service. Google initially designed the service where users were able to search video content. Google wanted to make an easy search function so that its users could easily search television shows and also find when and where to watch them. The search function was in no way comparable to You Tube. You Tube’s design was more simplistic and searching was much easier.

Google’s video service overall missed the mark in the small details as well. The Google video service did not incorporate the small details that users liked such as the number of views. This information was only available to the uploader and not the viewer. Google’s service allowed the user to search captions from a video, but the search would produce only related information such as broadcasting dates and not the actual video. Once Google began allowing user contributed content, it required special version of Video LAN to view the videos, making it inaccessbile to the average viewer. Google also offered a new flash technology which made it a lot quicker to upload a video, but viewing the video took considerably longer.

Youtube was a smaller company and there was no real threat or fear of lawsuits for copyright infringement. With Google, their pockets seemed endless and were a prime target for such lawsuits. This made Google more inclined to remove any copyrighted content and to sell premium videos, when the average user would not even consider paying for online video content (Cool, p4.) You Tube’s appeal was more of a user controlled site where anything was allowed and the content waas not controlled, which was all changed with Google’s acquisition. You Tube offered free music, videos and television shows without the legal right to do so, which attracted more users. Google’s Strategy
Google purchased You Tube for 1.65 billion dollars a year and a half after You Tube was founded. This leads to the question of the intrinsic value that Google placed on You Tube, there seemed to be some sort of ulterior motive going into the purchase, for Google would not have paid that amount for a newly formed company for no reason. The acquisition was clearly made for Google to gain a strategic industry advantage. The strategic reason behind the YouTube acquisition might be because YouTube had network designs specifically for video streaming while Google might not have the available networks to handle the video expansions. You Tube had this technology in place and setting up a new network capacity for video-market expansion is difficult and time consuming. A newly established website for video streaming might have to be adjusted, modified and updated daily in order to change with the changing needs and desires of the users. It seems to make a lot more sense to acquire You Tube as opposed to starting from scratch.

After the initial merger, You Tube decided to remove all copyrighted material from its site and adhere to the policy of removing additional copyrighted material upon notification from the copyright owner to do so. Initially advertisers would not consider advertising on You Tube as they did not want their name or brand associated or placed in or next to illegal material. The removal of the copyrighted material allowed You Tube to pursue advertising contracts and upload video advertisements to their site.

During the acquisition, online advertising was at an all time high going from $1.6 billion to $8.175 billion between 2006 and 2001 (Cool, p. 11). Google/You Tube decided to take full advantage of this trend by launching an extensive advertsing campaign within the videos that encouraged web developers and bloggers to to embed You Tube videos within their sites and the revenues would be shared.

The Google/You Tube Competitive Advantage
The main advantage that Google/YouTube was its easy accessibility. Users could visit the website see videos or upload videos or share videos. Google’s brand was extremely high regarded as the go to place on the web to search. If Google’s customers received similar capabilities in You Tube, then You Tube could build its brand image even larger than what it is. As a result of the merger, more people will be informed about the sources for watching streaming videos, as YouTube videos can be listed on the top of the search result to give viewers the incentives to choose. When a person wants to perform an online search, instead of getting the result list of text and journal documents, he or she will also be given some video-related contents. After users are given video content in future searches, the video will ultimately become the desired search result. This so-called behavior modification is being used and might prove to be effective since the number of online video viewers seem to be on the increase trend.

When YouTube was launched in February 15, 2005 it gained enormous success by word of e-mail and word of mouth. Figures quoted that 100 million clips were watched daily and 2700 videos uploaded every hour (Cool, p.3). You Tube’s established success placed the company leaps and bounds ahead of the competition who were just entering the market.

The customization of the site also played a large role in the Google/You Tube success story. YouTube allowed its users to post comments on the videos seen on their site. This helped users to create a social network of sorts where they could share their likes and dislikes. Each video on You Tube has a like and dislike option and showed the number of views for a video. In YouTube users can become a member of a group and discuss all sorts of topics related to videos. YouTube lets people create an online identity, so it's closer to a social network this helped it gain an image of social video website. You Tube also shows all users how many times a video has been viewed, which gives the user an idea on how popular a video is. YouTube also has features that displays top rated videos, offered similar videos that user may be interested in based on current video content, users can create playlists, and it also gives the user the ability to subscribe to videos and to share videos on other websites.

Supply Chain Dynamics The video supply chain can be defined as “the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities” pertaining to the distribution of online videos. This function would include the “coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers” (as cited in CSCPM, 2010). As we examine the video supply chain dynamics, we should first look at how it has evolved.
Initially, the industry was largely made up of user-generated content that consisted of amateur videos, Web-cam recordings, and home video clips. Originally a small stakes company, many organizations ignored YouTube’s infringements on copyrights and allowed them to grow without interference. The basic supply chain consisted of those who uploaded and those who used. Advertisements were sold on the site and revenues were received from these advertisers.
YouTube, founded in February 2005, is by far the most popular video downloading site. As it has risen from quite humble beginnings, the dynamics of YouTube growth is that it now sees 2 billion viewers per day; of relatively small files (avg. of 2.75 minutes), at a fairly low ad rate of 3-4% of the videos, and at a relatively low cost of around $10 per thousand viewers. The dynamics of much smaller Hulu in comparison, indicate that Hulu sees fewer visitors (approx 4 million/day), watching much longer videos (avg. of 27.5 minutes in length), with a much larger ad inventory of around 80%, at a cost of between $15 and $20 per thousand viewers. YouTube pays essentially nothing for its content where-as Hulu sees around 70 – 70% of its income to content providers. There is also a large delta in the distribution costs of the two organizations. Due to YouTube’s affiliation with Google and its extensive peer network, YouTube’s distribution costs are half of Hulu’s estimated costs. Otlacan (2011) discussed the February 2011 U.S. online video rankings which depicted a large gap in viewers between the affiliated Google sites and all other competitors (Reference Figure I). A major disparity was noted in the average number of minutes per viewer as Google sites and Hulu were more popular by far.
Cool, Seitz, and Mestrits (2007) noted AOL Video deviates from the above business model as its supply chain dynamics involve video on demand channels and free streaming content that viewers have the option of purchasing (p. 5). In their interview, Page and Schmidt (2002) noted that the main supply chain dynamic was the organization being centered on the concept of revenue sharing. In this respect, the individual contributor did some work and is paid their share; in the same regard AOL does some work, and it earns its share.
Organizations such as Yahoo were originally a video search engine, but soon extended its supply chain by offering users the ability to upload, share, tag, and host their videos; very similar to the MSN Video model. MySpace positioned itself by creating core groups of users who had some commonality. These groups served advertising places for media and consumer brands. Capitalizing on social interactions, MySpace offered video sharing service, allowed members to integrate their videos into their profiles, and even attracted many celebrities. These celebrities in turn, attracted fans to MySpace and more advertisers as well. According to Williams (2007), as MySpace affiliated itself with Google, it drove even more ad revenue, and hence, more profit to the site. This traffic facilitates bigger and better features in the future. Google’s presence in online video chain is that of a video search engine. As it aligned itself with Metacafe, iFilm, Yahoo! and others, to become basically a true search engine for videos. Google sells ad placements that the system places based upon the search query. Consisting of skins, overlays, or side bars, revenues from these ads were shared between the website, the creator, and Google. Further entry into the pay-site concept was noted as Hulu entered the market. Hulu offered mobile prime movies as well as premium TV programs. Hulu offered free basic TV and movie availability where the video clips are preceded by paid advertisements. Oruganti (2009) stated that the premium quality offered by Hulu attracted advertisers such as Best Buy, McDonalds, and Bank of America (p. 2). Rappa (2010) noted that Netflix provides content TV content as well as movies instantly over the internet based upon a fee schedule to gain access to the content (p. 5).
What is observable in the current dynamics of the supply chain are the institutions; which were originally entirely supported by user content, begin providing premium content, for some of which users paid a fee while others were supported by ad revenues. Video providers are gradually transitioning away from having any fee based content; rather they are focusing on whatever drives the most viewers to their sites. The internet video supply chain learned that the revenues are proportionate to the amount of web traffic; and that by adding more traffic, they can generate higher revenues. Figure II depicts the ranking of video ads and their properties as viewed in February of 2011. Hulu led the list with an average of 48.1 ads per viewer as compared to Viacom Digital at 11.7 ads per viewer. Within these statistics it was observed that the quantity of ads does not equate to viewers reached. Tremor Media Video was much more efficient as it reached 20.1% of the population.
According to the Global Internet (2009), and referencing Figure III, the preferred method of watching video content is currently through a PC, followed by a PC connected through a TV (p. 37). Referencing Figure IV it was noted that the receptiveness to watching ads interfere with viewing videos varied depending upon the medium and the percentage of ad volume (p. 39). Respondents to the survey were much more willing to view advertisements if the content delivered was professionally produced. If the content was user generated, users were least likely to be receptive to advertisements. Figure V shows a surprising find that users were actually willing to pay for professionally produced internet video, which brings into question whether studios and TV content providers are missing a growth opportunity (p. 38).
Current data indicates the distribution model is still expanding as we observed the mobile platform has experienced triple digit growth over the last few years. According to QuickPlayMEDIA in its 2010 study, consumer interest is very high in mobile video applications as 53% of the respondents were interested in potential services that would “allow them to seamlessly switch between multiple devices, such as PCs and smartphones, when watching programs” (para. 2). The article when on to note that consumer usage of mobile video applications continues to climb as the number of users that used this service climbed by 150% from 2009 to 2010 (para 4). comScore (2010) found that as the economy toughens, lower income users are turning to their mobile devices as both an internet access point and for entertainment purposes with growth rates above the overall market growth (para. 3).

(2010). CSCMP supply chain management definitions. Council of Supply Chain
Management Professionals.

(2010). QuickPlayMEDIA. U.S. Survey unveils strong consumer interest in multi-screen viewing of TV & movies. Retrieved April 29, 2011 from

(2009) Global Internet: Will Internet TV Fray the Cable?. Black Book - Web Video:
Friend or Foe...And to Whom?, 33-45. Retrieved April 29, 2011 from EBSCOhost

Chander, A. (2011). Googling Freedom. California Law Review, 99(1), 1-45. Retrieved from EBSCOhost.

Cool, Karen, Seitz, Matt and Mestritts, Jason (2007). YouTube, Google and the Rise of
Internet Video Harvard Business School Press. KEL403

Otlacan, O. (2011). comScore releases February 2011 US online video rankings.
Retrieved April 29, 2011 from

Page, L., & Schmidt, E. (2002) Partnerships: Google and AOL. Retrieved April 28, 2011 from

Patrick, A. (2008). How does YouTube make money?. Retrieved April 28, 2011 from Williams, W. K. (2007). A look at MySpace’s business model. Helium: Online Business.

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