Ten Tech Blunders: Whoops, We Stepped in It!: Page 4

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4) Google Spends a Silly Amount of Money

The Blunder:

Google buys the Napster of 2006 and gets embarrassed by an Australian teenager.

What Happened:

I know what you’re thinking: Google buying YouTube for a $1.65 billion was an absolute steal. When Google bought the 20-month-old Web site, YouTube boasted 35-40 million users (in the U.S. alone). So the site draws more eyeballs than American Idol, without needing to dole out paychecks to Paula, Randy and Simon.

And YouTube’s price tag pales in comparison to some prior media acquisitions. Yahoo paid more than $5 billion for Broadcast.com, @Home picked up Excite for $7.2 billion, and Terra swallowed Lycos for a mere $12.5 billion (gulp).

In this context, GooTube looks brilliant. Especially when you consider that those sites weren’t all revenue powerhouses, in contrast to YouTube, which has a major source of revenue–

Oh wait, you say YouTube doesn’t have a clear revenue source? Well, that’s still okay, because acquiring YouTube kept the video site out of the hands of rivals Yahoo and Microsoft. And with all the great content that YouTube has, monetizing the traffic will be easy–

Oh, what’s that? You say a huge chunk of the content is…copyrighted? Well certainly Google knew that. Even a fast search of YouTube reveals postings of Beatles music, the Harry Potter movies, scenes from Seinfeld, and video from the Super Bowl – which appears to pose a legal liability bigger than the North American continent. So clearly Google had a strategy in mind, probably some revenue sharing deals, maybe a–

Oh, Google has been sued? Don’t worry about it. I mean, c’mon, the $1 billion lawsuit filed by Viacom against Google for copyright violations was described by Google CEO Eric Schmidt as a negotiating tactic. These days, a $1 billion lawsuit is just a way to start a conversation.

And pay no attention to the fact that, were Viacom to win the case (or even settle out of court), a long list of other concerns would step forward to demand their share of the bounty. But at any rate, Google claims it will add a filter to YouTube to eliminate copyrighted material. (But shouldn’t that have been in place months ago?)

Some observers claim that only a small percentage of YouTube’s traffic derives from copyrighted material; other experts dispute that. Whatever the exact case, spending big on a sprawling legal liability, and scrambling to put filtering technology after the fact – while fending off legal action – certainly seems to be a huge fumble.

Especially when you realize that an Australian teen sent Google a fake cease and desist order, and the search giant was so nervous it quickly complied with the bogus request. Yikes!

Moral of the Story:

Even big, smart, progressive companies do incredibly dumb things sometimes.

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