In 2011, $1.65 billion is nothing to Google (NASDAQ: GOOG ). The technology
company dropped more than seven times that this year when it bought Motorola
(NYSE: MMI ) for $12.5 billion. Back in 2006, though, $1.65 billion still was a
hefty price tag, and Google paid it just to control YouTube, the video website
that changed the Web nearly as much as Googles own search engine. The thinking
was that YouTube would earn for Google like nothing else could. But it never
quite worked out that way. As recently as July, Google said it still hadnt found
a way to make YouTube a long-term revenue generator. Google CEO Larry Page said
during the companys second-quarter earnings conference call that YouTube was a
service consumers supported but, five years after the acquisition, YouTube
required more investment to be profitable. And invest it has. Google has been
working hard the past two years to transform YouTube into a video business for
the post- Netflix (NASDAQ: NFLX ), post-Facebook world. Googles latest YouTube
project is a new video editing service and its precisely whats been missing
from the site in recent years. Announced on Wednesday, Google added simple
editing tools so users can customize videos from within YouTube rather than
through other apps before uploading. Video editing might seem like a simple
addition, but it creates a bridge for users enamored with simple tools like
Apple s (NASDAQ: AAPL ) iMovie, as well as social forums like Facebook. Unlike
past video editing tools offered by Google , the new interface is clean and easy
to use, unsurprisingly borrowing the aesthetics of the companys recently opened
social network, Google+. By itself, this sort of project wont be enough to
revitalize the service but its a start on the road to finally making YouTube
worth the $1.65 billion investment. It is going to increase the number of ways
YouTube can be used as a social tool and as an entertainment tool
simultaneously. If users now can edit their own videos in YouTube instead of
just uploading them, its more incentive to use YouTube rather than uploading
those videos directly onto Facebook. If the tools are linked to and associated
with Google+, it will draw users to use Googles social network. Should Google+
see more users flock its way, Google will be able to push its streaming movie/TV
services through YouTube outside of the basic YouTube audience. This is where
other recent YouTube projects finally will find their place. In April, Google
started a pay-per-view on-demand movie service through YouTube with support from
Time Warner (NYSE: TWX ), Comcast (NASDAQ: CMCSA ), Sony (NYSE: SNE ) and Lions
Gate (NYSE: LGF ). Weeks before that, Google announced it was remodeling the
entire service, building YouTube around channels for different content to make
it more accessible on both living room televisions and mobile devices. These
changes were, on their own, counter moves to other businesses. Netflix is big,
Amazon (NASDAQ: AMZN ) is bulking up its streaming service and even Facebook is
offering on-demand rentals. Googles premium video options betrayed a company
just trying to keep up. Coupled with Google+ and social features like video
editing, however, premium video will transform YouTube into an ecosystem rather
than a website, and advertisers will see more value in the business than they
have in the past. As of this writing, Anthony John Agnello did not own a
position in any of the stocks named here. Follow him on Twitter at
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