bearstein: you’re an idiot. If you disagree, then please ship me $1600. In return, I’ll ship you $20 per year in perpetuity. Does that get you to understand why your position is idiotic?

I have no doubt that people like online video. That doesn’t mean YouTube can make money off of it. When you can’t run ads due to copyright infringement worries it’s tough to make money, and being more popular just means losing more of it.

Have you interacted seriously with a 15 year old girl who did not know what the internet was 5 years ago?

Those 15 year old girls are the direction that the internet is, and they are the largest market that will exist in 5 years. That target consumer does not download tv off bittorrent and does not care very much for rocketboom. They want to watch quick clips of dogs getting bowled over by babies. YouTube gives that to them.

15 year old girls watch 24, Lost et al on DailyMotion. That’s their entertainment, not TV anymore.

You are in a little developer world bubble, and you are not interacting enough with the dumb people to see the trend yet. But of course, I may be wrong. You are guessing, and I am doing the same. In 5 years, we will look back at this post and one of us will be wrong.

And speaking of the development of broadband, this is how my profile looked like:

’99 – 56K modem
’02 – 700Kb DSL
’04 – 2MBit DSL
’06 – 6MBit DSL
’08 – 16MBit DSL (will be implemented by my provider)

The price did not change all the while. This just proves my point – you are living in a bubble and you think things outside are happening just the same way. No, my internet has been progressively getting faster for the same price, whereas yours has been getting cheaper but staying the same speed. You made an assumption based only on the data that was available to you without considering that the situation may look very different in other locations.

It’s the same thing you are doing with online video. You are making an assumption based on your own usage patterns and are not considering the general population trend.

I’m the first to admit that IPTV is the way of the future. YouTube just isn’t it. It’s something entirely different. And it’s not as if Google’s two options were buy YouTube or forever be locked out of the market. They could have made a serious play at real IPTV by signing deals with Verizon or whoever else might offer customers the necessary bandwidth to get decent video into the home.

We’re a long way from any real wide-spread adoption of video over the internet (as anything other than a passing amusement) because the bandwidth to homes is not nearly high enough and it’s not increasing at any substantial rate. You probably have the exact same speed cable internet now that you did five years ago, and in five years you’ll probably still have it. It has gotten cheaper but it has not gotten faster.

And bearstein23: That’s the most ridiculous comment ever, for a few reasons.

1. Spending $1.65 billion for a site guaranteed to make $20 million per year in perpetuity is retarded. You’d make more by just putting the cash in a money market. That’s not a realistic outcome anyway, since it’s probably going to sink or soar. My vote is sink.

2. Capital gains are relatively low tax, compared to income. And I’m not an accountant, but I’m pretty sure making bad billion dollar acquisitions to save on taxes is both stupid and antithetical to google’s “don’t be evil” mantra.

Also your argument contradicts itself when you mention that if YouTube fails it would barely lower their stock price. In that case, how could it save a large percentage in gains taxes?

At the turn of the last century, there were lots and lots of car companies. Everything was expensive to produce, cars were rough and smelly and broke down often. Many people would have looked at the situation and said: Horses are easier and better.

That’s what you are doing.

The future of entertainment is in the internet. Receiving television by radio broadcast is a dying technology. Internet is much cheaper and a lot more interactive. You can actually produce advertisments that are targeted at the person watching the show.

This is going to happen, but at the moment what exists is the rough implementation – it’s all only half working, and is not yet perfect. But when it does, the company that is already in the market is going to dominate in a MASSIVE market. Not a large market, a MASSIVE market.

Google has used money raised from selling stocks to position itself in the online entertainment market in anticipation of what will come. Tied together with the advertisment section, and considering the technical expertise of google as well as the marketing reach, the chances that google has to dominate this future market are huge.

And don’t forget this: Google did not use its profits to buy YouTube. They used stock money, which is foreign injected money to purchase YouTube.

It’s a clever investment in my opinion. Stop thinking U.S alone and start realising the real reach potential of the internet.