What is the rationale for the deal between Google and YouTube in my view ?
Google has: brand, user base, great search technology, distribution partners, clickstreams/intentions, cross digimedia channels, strong in web applications, text based advertising model and mobile social networking.
YouTube: user base, user generated video content, commercial videos, brand name and online social network.
Together they have synergies in brand, user base, social networks (as to rise to the competition of MySpace), channels (mobile, fixed, IP TV, IM), (commercial) video ads besides text link ads, YouTube as a video test center for advertisers -> followed by exploitation in Google search results as sponsored video ads. In effect, Google has increased its negotiation power with (commercial) content owners -> better margins. More importantly, I think this deal is mainly driven by the need to stay number one in the search ad business relative to MSN and Yahoo. The deal with YouTube will jumpstart the lead of Google in video link ads. Additionally, by combining the social networking track record of Orkut, YouTube and Dodgeball, a significant competitor for MySpace might develop over time. Furthermore, Amazon and Apple are focusing on selling video and TV content over the Web. The combination Google-YouTube will bring more commercial impact to this market and rival the ones of Apple and Amazon.