• Financial Times, Monday, October 16, 2006 11:30 AM

In an interview with Eric Schmidt, Google's CEO, post-YouTube, the British paper wanted to know how the company justified paying $1.65 billion for a company that had yet to earn a dime. Schmidt's answer: We have the best advertising system in the world--and soon, we'll be able to apply it to video, too. "The real reason," he added, "was not the money, and not even the advertising--it was because we believe that video is going to be, and is sort of already, one of the most important new media types on the Internet."

But isn't everyone trying to move into online video? Media companies are clamoring to find an online business model, and most would prefer to drive consumers to their Web sites rather than license it to other sites and settle for a smaller cut of the revenue. Schmidt stressed: "We see ourselves as a technology provider and a distribution network. We're not in the content business... We want those media partners to put their media content ... into this emergent new and much larger system as a result of the YouTube acquisition." In other words, Google wants to force everyone to make friends so everyone benefits, but Google most of all.

Are media companies comfortable with this? Absolutely not. They're incredibly frustrated, because no one wants to partner away their assets. But at the moment, it seems as if they have little choice: Compete with Google, YouTube and the myriad other online video networks and risk failure--or partner and adjust their business.

Read the whole story at Financial Times »