Google acquired YouTube for $1.65B in 2006. There were several good reasons for this move, and it all came down to Google’s advertising business.
Capturing a larger share of online advertising market
Video content was rapidly gaining popularity (and it still is now). By owning a platform that attracts billions of viewers, Google could tap into a massive revenue stream from advertising. Additionally, it provided an opportunity for brands to reach a wider audience and experiment with different ad formats.
Keeping users on Google ecosystem
By the time of the acquisition, YouTube was already the dominant player in the video streaming market, with a 46% market share of online video traffic and growing. Now it’s the most popular video streaming platform in terms of monthly active users. When people search for a video online, they’re likely to find it coming from YouTube.
Serving more relevant ads
YouTube gives Google access to valuable user data, such as watching behavior and preferences. This data allowed them to build more accurate user profiles and serve more relevant ads.