• by Wendy Davis , Staff Writer @wendyndavis, October 10, 2006

Google's $1.65 billion purchase of YouTube--the largest acquisition Google has ever made--is a stunning example of how far companies are willing to go to build an audience.

The deal shows that, even in the age of the "long tail"--and what content could be more long tail than YouTube's vast collection of three-minute-and-under amateur videos?--companies still need to figure out how to aggregate visitors at their own portals.

While YouTube's video-sharing platform is impressive--clean, fast and easy to use, much like Google's search engine--Google likely wouldn't have paid more than $100 million for the technology alone, according to a Merrill Lynch report issued this morning.

In other words, Google paid more than $1.5 billion just for YouTube's vast audience--almost half of the online video market, according to Hitwise. Shelling out that much money for a user base--albeit a very large one--seems like quite a gamble.

Of course, News Corp took a similar risk when it purchased MySpace for $580 million--and that seems to have worked out so far. Yahoo, as well, is reportedly mulling a $1 billion-plus bet on Facebook.

But even as more deals crop up, users are proving fickle. Last month, the team behind LonelyGirl15 took their Web soap opera to Revver--after using YouTube to build a fan base. And, while MySpace and Facebook are thriving, the sites also have their defectors.

Yes, YouTube now dominates the online video market. But whether Google can hold on to those users, in the face of whatever technology appears next, remains to be seen.