The $1.65 Billion Dollar Brand

How much is a brand worth? Well that’s a very difficult question to answer in most cases because there are so many variables that go into measuring a brand’s value; but I can tell you the value of one brand, YouTube. This week YouTube was acquired by Google for $1.65 Billion yes that Billion with a capital “B” in what might be the purest example of the market value of one particular brand ever.

For those of you that are only now becoming familiar with YouTube, I’ll go ahead and start you off with a little background. YouTube is a social media website that allows users to post videos, any kind of videos you can think of, from home videos to clips from popular TV shows, clips from movies and even commercials. There is no subscription fee and the company’s revenue comes entirely from advertising sales. You don’t even have to be a registered user to view the clips, but you do if you would like to rate or comment on clips other users have posted, or if you would like to upload your own video clips.

The site has now become a phenomenon, and major advertisers and traditional media outlets have noticed and are increasingly incorporating YouTube into their marketing initiatives. A great example is NBC’s use of YouTube to promote its lineup of shows. NBC went from seeking legal action against YouTube for airing SNL clips without permission, claiming unauthorized use of intellectual property to now entering into a strategic partnership with the site and creating promotions specifically for YouTube’s audience starring “Bill the Promo Guy” to promote the network's new program lineup (see example here) and cross promoting it on the Tonight Show (see it here).

YouTube has now become THE source for video content on the web, a fact reflected in it’s ranking of the world’s 10th most visited site by Alexa web traffic rankings, and it is now growing at a faster clip than even red hot MySpace. The YouTube content is provided by the users and its technology is a basic video playing technology from Macromedia’s Flash software. Nothing about it content and technology-wise is particularly groundbreaking, and it is something that can easily be replicated. In fact, both Google and MySpace has created sections within their sites that mirror the usability of YouTube, the difference is Google is synonymous for search and MySpace for social networking. The video sections on MySpace and Google are nothing more than another feature for its users, and not the primary reason most users go there. That is reflected with YouTubes 46% of the online video activity market share, versus 21% for MySpace and only 11% for Google. Because YouTube only does video, it has become the source, and its brand is the poster child for the exploding online video movement. Users who have been receiving forwarded e-mail video clips for years finally have a central hub for everything video and they are flocking to the site by the millions.

So in conclusion, here you have a website using technology that they did not develop, featuring content that they have not created and has yet to make a profit. Doesn’t sound like a billion dollar business model, does it? But it is, the brand and only the brand is the value that makes it worth $1.65 Billion. Google, itself a highly valued brand, knows the power of a strong brand name and recognized that it would never be able to overtake YouTube in market share and would only be a secondary source. Google wants to be the leader in everything they do, and the only way to do that in this online market segment was to buy YouTube.

Jake Crocker is a Partner and Brand Marketing Director at Martin Branding Worldwide, Inc. and can be reached at: jcrocker@martinbranding.com