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Google's YouTube Gambit

Google is and wants to remain the premier search destination. Regardless of the kind of content (Web-based text, books, video or audio), Google wants to be the one-stop shop for search, a strategy that is paying off handsomely judging by its stellar third-quarter earnings.

Why Google?

The Internet is fragmented, with content scattered on many sites. How do you find what you are looking for? You go to a search directory such as Google. What's the connection to YouTube? A big one. YouTube is the first stop for users' video searches and was beating Google in an emerging search category.

Approximately 45% of U.S. Web searches are conducted on Google, according to comScore Networks. (The site's global market share is even higher, topping 60%.) But 46% of video-related searches are conducted on YouTube, according to Hitwise. (Google Video, by contrast, has only 11% market share.) Why does someone need to search for a video on a directory like Google when so much great video content can be found in one place, on YouTube? And because YouTube hosts the videos, it can't be circumvented by another party.

Unlike the majority of the content on the web, videos are not yet widely distributed among many Web sites. While a typical search for information would start with a general search engine, followed by a vertical search engine and then a content site, a search for a video will start on YouTube and end there, because YouTube not only acts as a directory but also hosts the videos. Vertical search engines could be circumvented more easily as they don't own their content, so buying one makes less sense to a general search engine. For example, Expedia (EXPE) is a directory of hotels and airline tickets, but so is Travelocity, Orbitz and many others. None of them own the airlines' and hotels' sites (which, by the way, are trying to encourage people to buy directly from them).

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