Will Fox Buy YouTube?

Let the bidding for YouTube begin. Except for a rumoured outrageous valuation, YouTube is a clear near-term acqusition candidate. Loren Baker at Search Engine Journal covers a Hitwise report that shows YouTube and MySpace to be the dominant entities in the nascent online video market. Here's the Hitwise traffic breakdown:

· YouTube — 42.94%

· MySpace Videos — 24.22%

· Yahoo! Video Search — 9.58%

· MSN Video Search — 9.21%

· Google Video Search — 6.48%

· AOL Video — 4.28%

· iFilm (owned by MTV/Viacom) — 2.28%

The bottom line here is that YouTube has emerged as the dominant player (so to speak) in online video. This makes the site an almost immediate candidate to be acquired. Yahoo! or Fox (MySpace's parent) are the logical acquirers. But in the second group would be everyone else: TW/AOL, MSN and Google whose own video site has failed to gain the kind of momentum the company hoped it would. Yet imagine the combination of YouTube video monetized with Google's Click to Play video ads.

I've heard that YouTube has conjured up an outrageous valuation for itself. But the traffic growth seems to justify some sort of premium. It will be bought relatively soon before it gets even more expensive to do so. Why? My understanding is that the company has a very high "burn rate" and it may be mindful of the lesson of Friendster — once hot, then not. They also don't have an effective monetization strategy going (though one may be in the "roadmap").

All those things, plus the interest of the major players, add up to an acquisition. It may turn into a bidding war because a number of these companies have equally strong interest in the space.

_____

Here's more from MediaPost (reg. req'd). Here's some comScore data on general video viewing trends.

Advertisement