Gootube Grabs More

I can't believe I'm saying this, but ... it's possible that Google (Nasdaq: GOOG  ) underpaid when it spent $1.6 billion to acquire YouTube last year.

No, you haven't been punk'd, and that's not Ed McMahon at your door. Yesterday, researcher Hitwise released a survey that claims Gootube's share of visits to U.S. video sites rose a breathtaking 70% between January and May.

But that's not the half of it. Hitwise also says that the next 64 largest video sites climbed by just 8% over the same period. As a result, Gootube now commands 60.20% of the online video market in the U.S., versus just 16.08% for News Corp.'s (NYSE: NWS  ) MySpace videos, 2.77% for Yahoo! (Nasdaq: YHOO  ) , and 2.09% for Microsoft's (Nasdaq: MSFT  ) MSN.

Talk about dominant.

Then again, you might say that Gootube has cheated its way to the top. The site is infamous for allowing postings of copyrighted material. Viacom (NYSE: VIA  ) filed suit for infringement earlier this year.

You'd think the threat of legal action would dampen enthusiasm for Gootube, but just the opposite appears to have occurred. And now, with the hit video serial Lonelygirl15 bringing in sponsorship dollars from Johnson & Johnson (NYSE: JNJ  ) , there's even more reason for advertisers to take a long look at what online video has to offer.

It's a pretty picture. According to eMarketer, online video advertising was a $410 million business in 2006, and will grow to $3 billion by 2010. Now, do the math. Gootube, with 60% of the market, could hold sway over more than $1.8 billion in streaming ads within three years. That's $1.6 billion for $1.8 billion. Yep, I'll take that all day, every day.

No, YouTube didn't kill the video star. It is the video star. And Google is lucky to be a part of its entourage.

Related Foolishness is both gooey and delicious:

Microsoft is an Inside Value recommendation. Yahoo! is a Stock Advisor pick. Johnson & Johnson is an Income Investor selection. Click on the appropriate link to try any of these services risk-free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers, who is ranked No. 2,737 out of more than 31,200 raters in Motley Fool CAPS, wonders whether you're a Marvel or a DC. Find out at Gootube. Tim didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool's disclosure policy is starring in a new YouTube series titled LonleyFool16. It hopes you'll tune in.

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