Google Figures Out How To Make Cash From YouTube

Google is to introduce one-click links to buy products associated with video clips on its YouTube site. The move will be the first step towards recouping the $1.65 billion it spent acquiring the company two years ago.

The new links allow viewers to automatically buy songs through iTunes or the Amazon digital download service. The links will appear next to videos of the relevant songs. There will also be appropriate links to buy the popular video game "Spore."

At the moment the music links are restricted to songs produced by EMI or Universal, two of the four major record labels. However, given how the music industry has seemingly taken every opportunity to jump on board new distribution schemes recently, there's a pretty good chance Sony and Warner will join the scheme as well.

In the long run, Google says it would like to extend the system to other products, for example concert tickets and band merchandise.

The most interesting aspect of the system is that record labels aren't limited to placing ads on official videos which they've uploaded themselves. Google is offering deals where they can automatically add links to any content featuring their artists, whoever uploaded it. (Source: nytimes.com)

Ironically this deal will work by the same system currently used to track down copyright infringing clips uploaded without permission. That raises the distinct possibility the music industry might find it more profitable to allow unauthorised clips (such as spoof remixes of videos, or clips shot on camera-phones at concerts) to remain online.

The plan may be the long awaited answer to Google's self-confessed problem of making money from YouTube's huge audience. At the moment, ads shown before or alongside clips rake in an estimated $100 million a year, a huge amount but quite probably too little to cover the site's mammoth running costs. (Source: fool.com)