Google + YouTube = Cable TV on the net?

While having a discussion with some friends over how Google has overtaken Microsoft as king of the tech world, the question on why Google paid $1.6 billion for YouTube surfaced. Like many of Google’s major initiatives, there must be a grand masterplan behind it all.

I’ve spent some time mulling over it and the conclusion I am getting is that Google may soon be partnering with content programmers to offer free Video content online and share a cut of the advertising revenue with them – similar to their current Adsense program. The only difference from traditional Adsense program is that the content is video instead of webpages. Users may for example watch Southpark on YouTube and be ‘forced’ to watch some commercials halfway through the video. Unlike cable TV where the same ad is shown to everyone watching the show, the advertising can be more targeted since each individual viewer can be show different ads based on the user’s age, gender, profession etc.

It’s a win-win situation for all because firstly, the user benefits because they don’t have to pay for Cable TV anymore. The content programmers can earn from advertising and thirdly, the advertisers benefit because their ads are now more targeted since YouTube will be using Google’s renowned contextual targeting technology to show the video ads.

Ultimately, they aiming for a slice of the $70 billion TV ad market. Not a bad move I suppose… maybe I should buy some GOOG LEAPS Options soon… 

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