On Monday, Google announced its acquisition of online video leader YouTube in a $1.65 billion stock deal, an amount unprecedented in Google's acquisition history. Despite the high price, however, experts believe the move strategically places the firm ahead of its rivals.
Online video is increasingly becoming an important tool for attracting users and monetizing visitor traffic, analyst Anthony Noto of Goldman Sachs said on Tuesday. Video should become a top service, similar to e-mail and search, he added.
The move should give Google a significant amount of video as well. YouTube accounted for 9 percent of all streams on the internet in July, according to market research firm comScore Networks. Meanwhile, Google only accounted for about 1 percent.
In acquiring YouTube, Google has, in one fell swoop, increased their number of video streams â€“ and potential ad revenue from streaming â€“ tenfold, Gian Fulgoni, comScore chairman said.
Noto adds that the purchase is a strategic positive, and it should propel Google into a top-3 video position. The combination puts added pressure on rival websites, particularly Yahoo.
Yahoo had held the top position in terms of online visitors in both streams and unique visitors for online video, but the Google and YouTube combination will challenge it for the lead.
[The]Acquisition will put the MSN and Yahoo! ad networks behind Google in video, Merrill Lynch's Justin Post said.
Google, who already handles the most search queries of any service, now leads in two of the big three online services: search and video, while Yahoo still maintains its hold on e-mail.
Being a leaderâ€¦should help Google to maximize engagement and optimize monetization, Noto concludes.