Today’s rumor that Google might be buying YouTube strikes me as highly unlikely, but deserves some analysis. Firstly, how does YouTube’s traffic compare to Google Video, and what effect did Google’s replacing the Froogle link with Google Video have?
The chart below shows that YouTube surpassed Google Video in early 2006, and that last month YouTube received a market share of visits 4 times greater than Google Video. Google’s replacement of the Froogle link with the Video on the homepage in August resulted in a 179% increase in visits to Google Video from July to September 2006, and only a 19% decrease in visits to Froogle over the same time period. Google obviously made the calculation that it had much more to gain from Google Video than Froogle. YouTube’s market share of visits increased by 24% in the same July-September period.

Google is YouTube’s second most important source of traffic other than MySpace. In September 2006, 10.7% of YouTube’s upstream visits came from Google, while MySpace accounted for 16.2% of YouTube’s upstream traffic. But what does that look like from Google’s perspective? The chart below shows the percentage of Google’s downstream visits to YouTube, Google Video, and Froogle. Beginning in late June, Google began sending more traffic to YouTube than Google Video, which most likely prompted the August placement of the Video link on the home page – we see that Google’s downstream traffic to its video service was flatlining, while downstream to YouTube was increasing. Interestingly, taking away the Froogle link in August did not so severely decrease the amount of traffic Google was sending Froogle as it increased the amount of traffic to Google Video.

How are the audiences for Google Video and YouTube different? Google Video skews more male and older than YouTube, and a look at the Top 100 videos on Google Video gives you a hint of soft porn, while the most viewed videos on YouTube (despite the ads) seem a bit more childish in nature. Also, YouTube’s average session time is double that of Google Video’s, at 18 minutes 33 seconds in the month of September versus 9 minutes 9 seconds for Google Video. YouTube is just plain sticky compared to Google Video.
If there is any truth to this rumor, my feeling is that Google, with its great engineering team, could eventually build all the features of YouTube and make it even better for far less money than it would take to buy it, if indeed the going price is over $1 billion. However, YouTube has an amazingly large video library and seemingly loyal user base that is only six months old, which would be nearly impossible to replicate. That alone could be worth $1.6 billion, especially since Google is getting into the video ad space. Let’s see what happens next week.