GOOGLE NABS YOUTUBE

With billions of ad dollars at stake for video searches, Google has thrown their hat in the ring in a huge way. The market for video ads is expected to hit $640 million in 2007 and $1.5 billion by 2009, according to eMarketer.

YouTube, a Silicon Valley start-up with two founders in their twenties which has yet to show a profit, grew a huge audience at a pace outdone only by MySpace.com, attracting more than 72 million unique monthly visitors.

YouTube foreshadowed the move by coming to content agreements with Warner Music Group, Universal Music Group, Sony BMG, NBC Universal and CBS, while Google pacted with WMG and Sony BMG.

Said Google Co-Founder Sergey Brin: "There's a new class of sites that have really developed very quickly, are very successful and very attractive to users and are obviously delivering value. It's kind of a next generation of Internet sites and companies… It's a whole new ecosystem, and we're excited to be a part of it."

The deal doesn’t come without its gambles, one of which is the possibility of copyright-holders suing the new company’s now-deep pockets, as suggested by Internet pioneer Mark Cuban in a blog last week.

Several analysts said they were surprised by the price of YouTube's sale, which equates to about $22 per visitor, compared to the roughly $10 per visitor in the MySpace acquisition by Fox Corp. College networking site Facebook, which has about 14.7 million visitors monthly, has been said to be in acquisition talks with Yahoo for $1 billion—about $67 per visitor.

YouTube has received $11.5 million in venture funding from Sequoia Capital, the Silicon Valley company which was also an early investor in Google, and now owns roughly 30% of YouTube. Google also will inherit a copyright-infringement lawsuit filed against YouTube by a journalist who operates the Los Angeles News Service.

YouTube said yesterday that it is developing a technology that will scan keywords and audio in the uploaded clips for potential copyright infringements. Chief executive Chad Hurley said he planned to introduce new advertising models and ways to integrate search and advertising technologies into the video clips.

"By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners," the 29-year-old Hurley, who founded the company with partner Steven Chen, a colleague from PayPal, said in a statement yesterday.

With more than 100 million videos being viewed on YouTube daily, it attracts about four times more traffic than Google Video. It also ranks as the 15th most-visited website in the world with 34 million visitors a month.

Google is down 4.48 in trading this afternnon, from an opening of 429 to 424.52.