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ATW 241 PRINCIPLES OF MARKETING Semester II Academic Session 2010/2011 Case Study Report:-

The Acquisition of By By Chuah Wen Xu Goh Chong Mun Khoo Khay Xiang Zhang Haibo Liang Zeyu ATW241 Principles of Marketing

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Table of contents 1.0 Introduction of & 2.0 SWOT Analysis of 2.1 Strengths of 2.2 Weakness of 2.3 Opportunities of 2.4 Threats of 3.0 Acquisition of 3.1 The Acquisition 3.2 The Deal 3.3 The Effects 4.0 Conclusion 5.0 Appendix 5.1 References 5.2 Presentation slides

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Introduction of


We are assigned to submit a case study about the topic “The Acquisition of YouTube by Google”. In order to complete this project, we have hardly found a lot of useful information about Google and YouTube. The main purpose for this project is to study whether Google acquisition of YouTube is effective marketing strategy. From the beginning, we have briefly introduced the background of Google and YouTube. At this point, we can know how well Google in decision making in the past and also find out what are the interesting points of YouTube that initiate Google to acquire it. After that, we started to identify the advantages and disadvantages of YouTube. Then, we used the data to make our SWOT analysis. This SWOT analysis is most important part because it provides us that the rough picture about the strength, weakness, opportunity, and threat of YouTube. Next, we have searched the performances of Google after it has acquired YouTube. This is because we need to find out whether acquisition of YouTube has boosted the revenue of Google. Lastly, we compared the SWOT analysis of YouTube and recent performances of Google. From here we have applied cost-benefit principle and truly understand the effectiveness of the marketing strategy. Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program. The company was founded by Larry Page and Sergey Brin, often dubbed the "Google Guys", while the two were attending Stanford University as Ph.D. candidates. It was first incorporated as a privately held company on September 4, 1998, and its initial public offering followed on August 19, 2004. At that time Larry Page, Sergey Brin, and Eric Schmidt agreed to work together at Google for twenty years, until the year 2024. The company's stated mission from the outset was "to organize the world's information and make it universally accessible and useful", and the company's unofficial slogan – coined by Google engineer Paul Buchheit – is "Don't be evil". In 2006, the company moved to their current headquarters in Mountain View, California. The company offers productivity software, such as its Gmail email software, and social networking tools, including Orkut and, more recently, Google Buzz, the web browser Google Chrome, the Picasa photo organization and editing software, and the Google Talk instant messaging application. YouTube is a video-sharing website on which users can upload, share, and view videos, created by three former PayPal employees in February 2006. It is found by Chad Hurley, Steve Chen, and Jawed Karim, who were all early employees of PayPal. The company is based in San Bruno, California, and uses Adobe Flash Video technology to display a wide variety of user-generated video content, including movie clips, TV clips, and music videos, as well as amateur content such as video blogging and short original videos. Most of the content on YouTube has been uploaded by individuals, although media corporations including CBS, BBC, Vevo and other organizations offer some of their material via the site, as part of the YouTube partnership program. Unregistered users may watch videos, and registered users may upload an unlimited number of videos. Videos that are considered to contain potentially offensive content are available only to registered users 18 and older. In November 2006, YouTube, LLC was bought by Google Inc. for $1.65 billion, and now operates as a subsidiary of Google.

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SWOT Analysis of

Internal Analysis:2.1

Strengths of YouTube

There are several features that show YouTube's strength. We can discover some videos through the 'search', 'charts', 'trending items', 'subscribe', 'browse' and 'recommend for you'. These features allow users to search for the videos they like according to some keywords and the popularity of the videos. YouTube also allow users to upload the videos to the website. It provides the 'insight', 'audioswap', and ‘uploading in HD‘, ’description and annotation for the uploaders. Audioswap allow users to edit the music of the video. While the insight show you the demographics of your viewers and other information about your audience. Uploading in HD requires the uploaders to have three options: 720p, 1080p, and most recently, 4K ("Original") resolution. Description allow user to drop some information about the videos. Annotations let you add text links to your videos. 'Share' includes 'embed', 'share' and 'autoshare'. Embed contained the code of the videos that allows users to copy and paste it on the social network to perform the video while 'share' allows users to share the video in the social network. 'Personalize' include 'channels', 'favourite', ‘build your queue', 'manage your subscription' and 'create a playlist'. Personalize is actually a feature that belongs to the users. Users can edit their home with some different colour background. The next strength of YouTube is about the creators. Creators of YouTube provide the users a clear information and explanation about their features. There are several corners in this page. 'Find inspiration', ' Optimize owns videos', ' Get some help', 'Feature kit', 'edit owns footage', 'upload owns videos', and 'get social' . In example, 'Find inspiration' is a blog that allow users to have a look and learn some information about the YouTube. 'Get some help' provide some Q&A about the YouTube often ask by the users. 'Feature kit' tells about the YouTube features. YouTube also explained about the advertisers. 'Analyze your audience', 'protect your copyright', 'show off your content', 'ad-supported', 'YouTube Rentals', ‘devices: Mobile & Leanback', 'Live streaming' are the features of YouTube. Analyze your audience is an Insight analytics tools help you find out which videos resonate with viewers, so you can satisfy your audience and advertisers. Insight provides clear, understandable summaries of the demographics, discovery methods, and engagement levels of the people who watch your videos. You can even see on a per-video basis whether your content is successful. Protect copyright is a Content ID system that offers you flexibility and control over your videos. You can choose to monetize, track, or block infringing content according to your policies with our fully-automated tools. If you offer rental videos to YouTube viewers, your content will be streamed securely after payment. Show off your content is the necessary tools to create a premium, lean-back viewing experience. All videos are streamed at the highest possible quality—up to full 1080p HD if available—in a 16:9 aspect ratio player. Partners can upload long-form content with no length or file size limit, and can present highquality video inside a fully-branded channel, with additional design and interactivity options. Adsupported video allows users to earn revenue on YouTube by participating in the ad-supported videos program. YouTube places relevant ads on partner watch pages and partners earn money based on a combination of impressions and clicks. YouTube Rentals are a new way for content owners to generate revenue on YouTube. Enjoy greater flexibility in monetizing a variety of videos, ATW241 Principles of Marketing

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maintain full control over your content, and tap into the world's largest online video community. Live-streaming enables partners to broadcast their content in real time to the YouTube community directly from the YouTube channel page. We initiated our live-streaming program with a few of our large partners and have now opened up the platform to an increasingly wide array of partners (our most recent live-stream featured content from Howcast, NewNewNetworks, Rocketboom and Young Hollywood). Check out our latest blog post for more information on updates to the program. YouTube shows an obvious strength compared to the traditional channels. The advertisers can upload their advertisement on the YouTube with ZERO cost while the traditional channels like TV requires a high cost. YouTube also shows the high flexibility as compare to the traditional channels. Users can just search for the video at anytime. Users cannot use the same way in the traditional channels. YouTube’s video stays on the website for long lasting unless the video has been deleted by the site. Videos on the traditional channel just stay for a certain period. Internet user has a huge improvement since the last 10 years while the traditional channels users stay at the constant rate. These rate shows that the YouTube has the potential to improve again in the next decade. Users can also watch the YouTube videos at anywhere by using some devices such as iPhone and Wifi services while the traditional channels users can just turn on the video at some certain place etc at home. 2.2

Weakness of YouTube

The weakness of YouTube is it just allows the maximum length of 10 minutes and 59 seconds. YouTube also face some copyright issues. Moreover, the privacy issue has often arisen from YouTube. Some people privacy often abuse by the uploader through uploading videos on YouTube. Furthermore, the revenue from YouTube is hard to anticipate due to the super-huge amount of videos and users. Besides, copyright issues will be another weakness of YouTube. YouTube unable to make sure that each and every video clips uploaded by the users are their own production and not pirated video. There was not a system to track the copyright issues. On the other hand, YouTube appear with privacy issues and it is open to abuse. Every user is allowed to upload his or her video. It may cause the problem of abusing the platform. This may cause the personal privacy leaks to public. Furthermore, YouTube unable to make sure that the users and the advertisers anticipate the real revenues from their videos. The videos just can act as a promotion video or increase in the publicity only, but maybe not in term of the real revenues.

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External Analysis 2.3 Opportunities of YouTube 1) Increasing in number of viewing and internet users  From the statistic information of YouTube, the users of YouTube are increasing year per year.  Within 5 years time from the birth of YouTube, it makes a remarkable accomplishment that allows it to become the Top 1 among the same industries.  In 2010, YouTube exceeds 2 billion views a day and this enormous number would be expected to increase in future time. 2) Partner ad revenue rises  Since YouTube becomes more and more well-known today, advertisers will have a very big interest to make their advertisements through it.  Advertisers would like to establish partnerships with YouTube and lead to a win-win situation which is YouTube can gain revenue from the advertiser while the advertiser can post their ads through the useful features. 3) Consumption and partnership between social networks and YouTube is expected to increase generously  Nowadays many people would like to share some video clips in their social networks such as Facebook, Twitter, Scribd, etc. which are uploaded from YouTube.  Other social networks are expected to include YouTube as their partner in order to maximize the utility of users. 2.4 Threats of YouTube 1) Banning of YouTube due to national policy  Every country also has its own publish policy and for those sensitive issues or offensive issues which oppose the policy would be banned.  Although there are countries not permanently or actively ban YouTube, however, temporarily banning will also affect the revenues. For example China ban YouTube, there would be a huge lost due to huge population. 2) Growing number of competitor  Existing competitors are becoming competitive gradually.  Enormous revenues earning of YouTube have attracted a lot of outsiders to enter this industry.  Number of competitors is undoubtedly rises due to global copyright problem unable be solved completely. 3) Ethical issues and problems regarding social responsibility  Ethical problems for YouTube will never end.  Insufficient filtration of videos will lead to sensitive issue but too much filtration also affects the revenue.  An obstacle for future progressions.  Reputation would be affected.

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The Acquisition of

October 9, 2006 - Google Inc. announced that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community. Why this acquisition happened? 1. This acquisition has a great ability to solve copyright issues, which always happened on YouTube before acquisition. Thousands of video made by user, stored and distributed through YouTube. These videos use music and clips of TV which are infringing copyright. This problem can be solved through acquisition. Google as the largest search engine in the world has the biggest resource bank. Due to this reason, Google provide a broader workplace for YouTube. Moreover, Google has many partnerships with musician, authors, and TV stations. YouTube as a subsidiary of Google also have the right to use resource from musician, authors, and TV stations. 2. “Video is a great medium for advertising.” By Sergey Brin, Google’s co-founder and president of technology. Video advertising can provide visual, hearing, textual experience at same time. It could attract more potential consumers. Subsequently, advertiser will earn more profit. 3. Before Google bought YouTube, Google already has Google Video, but it has failed to bring a lot of visitor attraction. The Google YouTube deal has instantly catapulted Google as the leader in online video, which is quickly becoming an area of much interest for advertisers. After acquisition, Google video-sharing service reaches 80% of the interest video viewing audience and serves 45 billion ads daily. 4. YouTube offered a more social community. It brings people together in a virtual world. People can write comment on the video, talk with others and show their own opinions. These characters lead to YouTube develop a virtual society the attraction of social aspect of YouTube is one that certainly appeals to Google as they have executed social networking quite poorly in the past. 5. As we known, advertising is the dominated method to earn money. Advertisers buy partial time of a video to show their products or services through pay some fees to YouTube. But before acquisition, YouTube did not do a good job on advertising. This drawback can be overcome by Google’s sophisticated advertising system. Google has grand accomplishment in ads, los of successful experience and methods. It can not only offer excellent advertising system for YouTube but also fantabulous opportunity for advertisers.

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The Google had been acquired YouTube with $1.65 Billion in Stock and paid to the owner of YouTube on Oct, 2006. YouTube remain their separate services and management from Google. Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community. The acquisition combines one of the largest and fastest growing online video entertainment communities which are YouTube with Google’s expertise in organizing information and creating new models for advertising on the Internet. The combination of Google and YouTube will be focus on providing a better; more comprehensive experience for users interested in uploading, watching and sharing videos, and offered new opportunities for professional content owners to distribute their work to reach a vast new audience. From this acquisition of YouTube by Google, we can observed that the changes in economic, business, competitive, technological and others regulatory factors. The levels of traffic on the YouTube site and the ability to compete successfully in this highly competitive, dynamic and rapidly changing marketplace, Google and YouTube had been work out and find out the solutions overcome it.

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Grewal, D and Levy, M 2010, Marketing, 2nd edition, McGraw Hill Irwin, New York. YouTube Corporate Profile Google Corporate Profile Google Press Centre: Google Closes Acquisition of YouTube, Google Press Centre: Google To Acquire YouTube for $1.65 Billion in Stock, Google Finance: Google Inc. Yahoo Finance: Google Inc.

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ATW 241 Principles of Marketing Case Study  

ATW 241 Principles of Marketing Case Study - Acquisition of YouTube by Google

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