About two years ago, Google (NASDAQ: GOOG) paid $1.65 billion for YouTube. The purchase is now starting to look like a poor decision.

According to The New York Post, "YouTube's numbers for 2008 don't look pretty: while 3 billion videos are viewed every month, revenues could total an anemic sub-$200 million this year."

Some analysts believe that the trouble with YouTube is that the videos are too short, or that it is difficult for marketers to figure out in advance which content will pull well with users. Those views are wrong.

The basic trouble with YouTube is that that video quality of 99% of the content is terribly poor. Source material for many clips comes from home video cameras or cellphones. None of that is of "production value." Putting ads that cost millions of dollars to create next to low-resolution content is a hard sell.

YouTube has a very basic problem. Most of its videos don't look good and a lot of them are barely watchable.

Douglas A. McIntyre is an editor at 247wallst.com.

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

I remember way, way back to November 2006 when Wall Street was stunned that Google (NASDAQ:GOOG) was paying the ungodly sum of $1.65 billion for privately held YouTube. How were they to monetize this goofy, home video web site? Since November 2006, it appears that Google got a bargain when compared to other social networking web sites.

Facebook has over 80 million users including a new Facebook profile for Democratic presidential nominee Barack Obama. Facebook attained Wall Street relevancy last year when Microsoft (NASDAQ: MSFT) agreed to pay the unheard of $246 million for a 1.6% ownership stake. That October 24, 2007, Microsoft investment valued Facebook at nearly $10 billion in the private equity world. As of yet, there is no filed Facebook IPO, but investors bet the company will file an IPO before the end of 2009.

The new player capturing headlines in the social networking world is LinkedIn. The company is designed for the business and professional world. The more than 23 million registered users represent over 150 different industries. It's a place to swap ideas, best practices and other opportunities.

YouTube is a diverse place. But at the same time, Google (NASDAQ: GOOG) needs to monetize things. And that means going Hollywood.

So this week, YouTube premièred its "Screening Room" channel (yes, it was at the Henry Fonda Theater in Hollywood). Basically, it's a place to see – on an exclusive basis – indie films. In fact, the films on the Screening Room will be eligible for YouTube's revenue share program.

To get some perspective on things, I had a chance to interview Chase Norlin, who operates Pixsy (an online video search engine). According to him:

"This speaks to the 'hidden' reason as to why YouTube was acquired by Google: specifically, a platform that can facilitate the aggregation of all short, medium, or long form video content. Given the audience reach of YouTube and the reach of Google AdSense, this provides an amazing opportunity for Google to quickly get into the media licensing and distribution business. Video content can now easily be aggregated, distributed, and monetized across a large network (AdSense will soon become video-based when monetization surpasses their existing text-based levels). Additionally, a large pool of licensed video material means that Google can, over time, become a significant contender in the media business."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Google (NASDAQ: GOOG) wants to see if the attention span of its YouTube users can be stretched a bit. According to this Fortune article, YouTube seems to think that short clips might not necessarily be the backbone of long-term growth. Instead, longer videos might make the site more valuable. Why is this? Well, the article intimates that the founders of the site, Chad Hurley and Steve Chen, think there's a market out there that might want something more than simple, user-generated content that focuses on the banal side of life for about three minutes per clip.

I see the point here. Google wants to figure out, once and for all, the best way to monetize its YouTube investment. This isn't the easiest thing to do, since users of YouTube are, in theory, only interested in seeing short content as fast as possible. They don't want to be burdened by ads. But YouTube is betting that maybe, just maybe, by going against theory and putting on longer material of better quality, the eyeballs will become more intrigued and will perhaps be willing to view a greater quantity of videos. It all comes down to the quality of the content.

For some time there has been an uneasy feeling that Web 2.0 companies were having trouble making money. A number of the companies are private and not much is said about how their financials work. Digg.com does not issue quarterly statements.

But some of the new age companies like MySpace, which was bought by News Corp (NYSE: NWS) and YouTube, which was bought by Google (NASDAQ: GOOG), have enough of their financials available for Wall Street to get an idea of what is going on.

Based on comments from Google and News Corp, their huge Web 2.0 sites are not big money-makers. MySpace does well under $1 billion in annual revenue. Its smaller rival, Facebook, was recently valued at $15 billion. That number now looks very high.

According to the FT, "The shortage of revenue among social networks, blogs and other "social media" sites that put user-generated content and communications at their core has persisted despite more than four years of experimentation aimed at turning such sites into money-makers."

Facebook, YouTube and MySpace may draw tens of millions of visitors each month, but they can't make a dime. Marketers are not interested in amateur video and postings from people who spend 20 hours a day on PCs and are afraid to leave their homes.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 newsletter.

Microsoft Corp. (NASDAQ: MSFT) will soon further into the world of online video as it has introduced software that will allow customers to watch online videos and chat about them in real-time. Called Messenger TV, the new service will combine Microsoft's Windows Live instant messaging program with an integrated video player. Windows Live Messenger, though, still is not the world's largest instant messaging platform. That honor belongs to AIM, one of AOL's more successful products ever.

Microsoft's goal in introducing the new instant messaging program with integrated video is to get its customers talking about the videos they are watching, as well as allowing them to watch and share clips from such companies as MTV, Sony BMG and EMI Group, some of the largest music companies on the planet.

Is this yet another attempt by Microsoft to try and "catch the wave" of online video usage? If that is its thought, it's already missed the boat. Google, Inc. (NASDAQ: GOOG)'s YouTube is where online video is already at, so this new Messenger TV product needs to offer something new and compelling. Microsoft will be rolling out this new service in Europe first, though, as there are 95 million users of Windows Live on that continent already -- the lion's share of the company's total base of 240 million customers.

One of the messages out of the Google (NASDAQ:GOOG) shareholder meeting was that management plans to make more money on huge video-sharing site YouTube. Without going into detail, the search company said it would bring out sets of software tools which would make it easier for marketers to use the site more effectively.

According to Reuters, Eric Schmidt, the company's CEO "said getting the video sharing site to make money is the Web search company's top priority for the year." It is a nice promise, but it is hard to see how it will work.

Unlike new video sites including Hulu, a premium content web destination used by the large media companies to showcase their video, most of the YouTube content is posted by the ordinary citizen. The clips are primarily short and of poor quality. For some time, one of the most popular videos on YouTube was "The Farting Preacher." That may not be the kind of content big marketers find appropriate to use to draw new customers.

YouTube's problem is not its size. It is the largest video site in the world, based on visitors. But, it is also a website based on a community of people who see its as a place to homestead with the own content. Advertisers may never be comfortable with that.

Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Over $10 letter.

According to an AP article citing data from comScore Inc., people are still in love with the internet. In fact, they love to watch videos on the internet. Furthermore, views of videos online experienced an ecstatic rate of growth in February -- they shot up 66% compared to the year-ago period. Incredible, right? And if you're a media company, you love the data, right?

Well, if you're Google (NASDAQ: GOOG), you love it. If you're a Disney (NYSE: DIS) or a General Electric (NYSE: GE), you would be of two minds about it. For you see, while people are watching videos, oftentimes they are doing it on a platform like Google's YouTube -- they aren't necessarily watching them at ABC.com. The data show that YouTube increased its video views by 15% in February 2008 versus February 2007, and that it captured one-third of the 10 billion video views that occurred in February of this year. Amazing. But sites like ABC.com captured much, much less of those views -- that site, in fact, had a measly 1% share of the pie.

Major content players want surfing eyeballs to come to their sites so they can monetize their online libraries via methods of their own making. Media companies, simply put, still haven't figured out how to adapt to this new electronic entertainment economy, and they still haven't come to terms with YouTube. In an era of social networking and clip sharing, users love to copy content and upload it to sites like YouTube that are very easy and friendly to engage, thus bypassing the owners of such content. How does one fight this?

Was YouTube really worth $1.65 billion to Google, Inc. (NASDAQ: GOOG) when the world's largest search company bought it a few years ago? By today's standards, that now seems like a bargain. Consider Yahoo! Inc.'s (NASDAQ: YHOO) impending purchase by Microsoft Corp. (NASDAQ: MSFT) and Microsoft's "small" stake in Facebook that values the social networking site at $15 billion.

YouTube is probably one of the most-used sites I see from friends and family these days. Hours upon hours can be wasted navigating through all the content there, and now that YouTube has launched its YouTube Insight tracking tool, the equivalent of viewership tracking is now available to those who upload videos to the site.

Imagine being able to see details like when, where and how often your videos are being viewed. Previously only available to advertisers at YouTube, all YouTube video uploaders can now see this kind of information. To those who think web surfing time may be eating into television-viewing time, this should provide more detail on whether this is actually happening. Nielsen, eat your heart out.

Professionals and amateurs alike will now be able to test the popularity of different kinds of content at different parts of the days across different parts of each country to make the content as customized as possible. This is what Google is famous for -- relevancy. No blanket ads here -- the company wants its YouTube users to become more successful, which in turns makes it more successful. Rack up another content relevancy win for Google here.

Google's (NASDAQ: GOOG) YouTube continues to gain visitors. It competitors have to be dismayed. Why bother posting video content at all when YouTube owns the market.

According to comScore, YouTube had a 34.3% share of all videos watched in the U.S. during January, an improvement of 1.7 share points over the previous month.

The competition barely registered. AOL, Yahoo! (NASDAQ: YHOO), Viacom (NYSE: VIA), and Disney (NYSE: DIS) had embarrassing share figures, none posting a figure better than 3.2%.

Visitors to Google video sites spent an average of almost 110 minutes per viewer. No other large internet site was above 33 minutes.

Douglas A. McIntyre is an editor at 247wallst.com.

Recently, TiVO (NASDAQ: TIVO) announced a partnership with Google (NASDAQ: GOOG) that is likely to massively expand both its own viewership and that of Google's YouTube. Apparently, TiVo has plans to make it possible for YouTube subscribers to view their videos directly on their televisions. Viewers will access their YouTube accounts from their TiVo boxes and will be able to create and display customized playlists.

On the one hand, this seems like a masterstroke. After all, I can't count the number of times that I've found myself with a group of friends clustered around a tiny little computer screen, watching a commercial from the sixties, a film trailer, or a segment of Saturday Night Live. Half the joy of finding these little gems is sharing them with friends and loved ones, and that's a lot easier to do on a huge screen.

On the other hand, YouTube videos tend to be very small and have low-resolution, which makes them ideal for the internet. They can be quickly and easily uploaded, and the miniscule viewing area of the average computer screen makes their poor resolution a minor problem. However, transferring these tiny videos to a 32-inch television screen will render them practically unviewable. I have a crystal-clear vision of nostalgia-hounds and techno-geeks around the country squinting at televisions while asking themselves if they're looking at images of an Elliot Spitzer press conference or footage of a giant boob. The answer, of course, is what's the difference?

(I know, cheap shot!).

Developers are already preparing what is sure to be a veritable Aladin's cave of extras and I imagine that they will address this problem in one way or another, but it's hard to get beyond the fact that YouTube, for all its wondrousness, might be limited to one type of venue.

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. YouTube has already cost him thousands of man-hours worth of work (and counting).

This is my shortest post ever but I had to share with our readers a marvelous little bit of musical humor. Click on this to see the best Tech-stock bubble video on YouTube, performed by the Richter Scales (to the tune of Billy Joel's "We Didn't Start the Fire") -- very clever. Hope you enjoy it. I am sure it will make the rounds for a long time to come.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of GOOG, but I do get silly once in a while.

These are definitely some interesting times for e-commerce mega site eBay Inc. (NASDAQ: EBAY). In the past few weeks, the site has been under attack from some of its sellers who have launched a strike against the site in response to recent changes. While eBay denies any impact from the strike, there are some out there who just aren't buying it.

At the root of the current situation are changes made by eBay over the past month that have left its users frustrated to say the least. The core reason for the frustration relates to eBay's decision to lower its listing fees but at the same time raise its final sale fees. This is being seen as a direct slap in the face to the site's more successful sellers. Also adding to the current resentment is the decision to hold certain PayPal payments by up to 21 days in an effort to fight fraudulent activity on the site. As if those two things were not enough, the site went forward in changing its practice of allowing sellers to leave negative feedback on buyers.

As you can imagine, sellers were not happy and launched a sellers' strike that they hoped would convince the company to roll back their changes. Depending on who you listen to, the strike has either had a significant impact on auction listings, or no effect whatsoever.

DivX, Inc. (Nasdaq: DIVX), which develops video applications, thought it could succeed in the topsy-turvey web business. So, in late 2006, the company launched Stage6.com.

Well, for the most part, it's not as easy as it looks and now DivX is closing down the site. Interestingly enough, DivX wasn't able to find a buyer for the property.

What happened? Well, I had a chance to interview Chase Norlin, who operates Pixsy (an online search engine). According to him:

"Stage6 likely needed a sugar-daddy to support operations going forward (e.g. acquirer with resources or large capital raise). Given the popularity of the service and the high quality of their streams, they probably had a significant bandwidth bill without the monetization to support that in the short term. Additionally, legal issues around copyrighted material may have added to the decision."

OK, so I lied about it. To my knowledge, Billy Joel hasn't yet opined on the subprime mess. But we'll keep you posted if he does.

Instead, a hilarious riff on Joel's hit "We didn't start the fire" is making the rounds on the internet -- It's definitely not as good as Merle Hazard's "hit" "H-E-D-G-E F-U-N-D" but it's pretty good.

I wonder whether YouTube videos featuring market-oriented gallows humor could be seen as a sign of a bottom -- a sign that the traders/managers making these videos have finally gone nuts.

In case you missed out on Hazard's follow-up, check out "In the Hamptons."