Can YouTube Me Now?

Have you seen those Verizon Wireless ads, touting the power of its network by having its cell phone users backed by a mob of support? Of course you have. It's on, like, every five minutes. Well, in another case of life imitating art, Verizon Wireless is supposedly going with the masses by teaming up with YouTube.

This morning's Wall Street Journal reports that Verizon Wireless -- a joint venture between Verizon (NYSE: VZ  ) and Inside Value recommendation Vodafone (NYSE: VOD  ) -- is in advanced talks with YouTube to have the popular video-sharing site offer streaming video content for Verizon Wireless customers through its premium VCast service. The deal will also provide televised content for the nascent cable television offering that Verizon launched in select markets last year.

As a perpetually replenished well of viral content, YouTube would be a great catch for Verizon. It also makes the timing of Google's (Nasdaq: GOOG  ) $1.65 billion all-stock buyout of the Web video sensation all the better for Google.

Clips for kicks
The convergence of the "clip culture" phenomenon with televised content isn't new. Everyday people in unusual circumstances have been network fodder long before Ashton Kutcher or Jamie Kennedy began playing pranks on the unsuspecting. Even the America's Funniest Videos franchise would be remiss in not thanking Steve Allen, Bill Cosby, and Allen Funt.

Even in the "new economy" space, this potential pairing wouldn't be revolutionary. Viacom (NYSE: VIA  ) has gone on to acquire iFilm and AtomFilms to help feed its Web Junk 20 viral video showcase on VH1.

However, just as iFilm and Atom helped usher in the era of Internet video -- and just as Viacom's MTV pioneered the art of music videos -- being an early arrival often gives those who follow the advantage of learning from your mistakes. In this case, YouTube took the medium to the next level by making it a community-driven fairground with caramel-dipped Web 2.0 goodness and cotton-candy democratization.

YouTube has gone on to serve 100 million videos a day -- and growing -- because of its open door policy. Viewers appreciate the lack of in-video ads and registration tollbooths. Submitted videos aren't vetted for quality like many of the original sites with velvet rope acceptance methodologies. The community, by and large, polices itself. YouTube isn't perfect. It's far from perfect, in fact, but that's part of its charm. It's spontaneous. It's human. It's real.

The high price of success
Not every revenue stream is worth paddling. Even this seemingly positive deal with Verizon Wireless can backfire. How? Glad you asked. Verizon Wireless subscribers may have no problem paying for YouTube VCast streams, but where is that money going? Naturally, Verizon will share some of it with YouTube, but what about the videos' owners? Do they deserve a piece of the action?

It's a sticky subject. YouTube has been running ads in select areas of its site and pitching movie trailers and network clips throughout the site. There hasn't been much of a community backlash over this, as everyone understands that delivering chunky video files doesn't come cheap. But we've already begun to see some unrest in the comments page of the video uploaded by two of the three YouTube founders in announcing the Google acquisition. It wasn't enough for mutiny, but we can't forget that YouTube doesn't create content. Will the community falter if YouTube begins profiting by simply repackaging and repurposing third-party content?

Over at eBaum's World, featured videos get $500, but that hasn't stopped the company from being condemned over video ownership issues and its practice of placing its own site's watermark on the streams. YouTube does not place a watermark on its videos, but how will webcam junkies and aspiring directors feel if YouTube begins profiting from their wares? Will exposure be enough?

Some of the top draws have already voted with their feet. Lonelygirl15, the most-subscribed channel on YouTube, continues to upload to the site, but prefers to embed its uploads on -- a video site that shares ad revenue with the clip owner -- to showcase on its own stand-alone website.

Last week, I took the clever Sam Has 7 Friends online serial to task for its lack of YouTube viewership. One of its producers wrote me to explain that the series is receiving more than 10,000 downloads a day as a podcast through Apple's (Nasdaq: AAPL  ) iTunes site. In short, maybe YouTube is already losing it as the stage of choice.

It can't be too cocky. This Verizon deal is a validating victory, but YouTube can't forget that it built its empire by standing on the shoulders of emotional exhibitionists and hobbyist directors. There may be more mouths to feed than just the copyright-infringed.

Can you hear me now, YouTube? Google?

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Longtime Fool contributor Rick Munarriz isn't a YouTube junkie, but he does find himself on the site more often than he would care to admit. He does not own shares in any of the companies mentioned in this story. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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