NEW YORK: Google Inc.'s $1.65 billion deal Monday to buy social networking website YouTube has put pressure on rivals Yahoo and Microsoft to beef up their offerings in this realm. Yahoo is understood to be upping its efforts to speed up its talks to acquire Facebook.com, the No. 2 U.S. social networking site.
Analysts say all major internet players are eyeing for a considerable presence in this domain, which has been securing higher valuations. Yahoo is understood to be already in talks with Facebook for a possible merger and the price quoted is around $1 billion. Facebook is a successful site targeted at collegians and youths.
A Yahoo spokesperson declined to comment on the speculation.
Meanwhile, sources in the know said Microsoft, which too has ambitions to be in this space, has been testing its own video-sharing service MSN Soapbox since September. Limited number of users has been invited to make use of the site and it is expected to be available in about six months. Analysts say Microsoft thinks floating a site of its own is a better option rather than acquiring one and overpaying for it.
The YouTube acquisition, Google's largest so far, is set to place the search company at the top position in internet video and help it to continue to dominate the growing online advertising market. According to rough estimates internet video advertising could generate revenue in excess of $1 billion by 2008 and Google, which has been lagging behind in this segment, could gain some of the lost ground with the acquisition.
YouTube chief executive officer Chad Hurley said working with Google will give the company a lot of options in creating ways to engage users with brands.
Eric Schmidt, Google's chief executive officer, said the two companies are natural partners to offer a media entertainment service to users, content owners and advertisers. He said the YouTube team has built an "exciting and powerful media platform that complements Google's mission to organize the world's information and make it universally accessible and useful."
Yahoo is already selling video ads on sites including Yahoo Music. It has been accepting video clips from its users since May.
YouTube was founded by Hurley, Steve Chen and Jawed Karim in February 2005. Hurley, 29, is chief executive officer, while Chen, 28, is chief technology officer. It has some 100 million videos, viewed everyday and an estimated 72 million individual visitors every month.
Google said YouTube will operate independently and retain its brand, own offices and all 67 employees. The firm has a new office in San Bruno, California.
Google intends to operate its own Google Video separately.
According to sources, Yahoo had tried to acquire YouTube and some weeks ago, the company had in fact been negotiating the price and other terms, but the deal fell off, and then Google stepped in and lapped up the deal.
