Apple did Google a favor by dumping YouTube from iOS

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Jason

Although Apple's (NASDAQ:AAPL) controversial decision to remove preloaded Google (NASDAQ:GOOG) Maps access from iOS 6 attracted most of the attention, let's not forget it ousted another Google app at the same time: YouTube, which returned to iOS devices in mid-September as a standalone, ad-supported app. Consumers are adapting seamlessly to the new status quo, however. Mobile metrics firm Onavo reports that within weeks of its release, the YouTube app was installed on about 20 percent of all iPhones across the U.S., and by the end of December, that number increased to 44.5 percent.

We can safely assume Apple did not have Google's best interests in mind when it kicked YouTube to the curb, but the termination of their longstanding mobile video partnership could prove enormously beneficial for Google over the long haul. The old, preloaded YouTube for iOS operated under Apple's rules and restrictions: This past fall, Google executives told CNet that Apple built the original app itself according to YouTube's instructions but updated it infrequently at best, even as Google tricked out the YouTube experience for its own Android mobile operating system. Apple also instituted a ban on advertising, which in turn restricted consumers' access to copyrighted content. "Over the years that resulted in a more limited experience for our users and lots of frustration," said Francisco Varela, YouTube's global director of platform partnerships.

The standalone YouTube for iOS is a different animal. The app offers a wider feature set and an expanded selection of video clips, including music videos. It also incorporates Google ads. Because both Google and Apple have refused to discuss the terms of their YouTube partnership, it's impossible to determine how the old preloading deal impacted Google's bottom line, but with the standalone app now on close to half of all iPhones nationwide, mobile ad revenues appear likely to make up the deficit sooner or later, assuming they haven't already done so. Keep in mind just how much video content mobile subscribers consume: This fall, Google revealed that YouTube mobile views have quadrupled during the past 18 months, with mobile devices generating a quarter of all traffic across the platform. In markets like Saudi Arabia, half of all YouTube consumption now takes place via mobile. 

And if you think YouTube clips can't generate serious revenues, think again. This week Google revealed that South Korean rapper Psy's "Gangnam Style," the most watched YouTube video of all time with more than 1.23 billion views, has generated $8 million in online advertising deals since premiering last July. (YouTube partners claim half of all revenues from their content, meaning Psy and his record label have raked in about $4 million to date.) Although the "Gangham Style" craze is slowing down, Google said in November that viewers are still playing the clip between 7 million and 10 million times a day, so revenues continue to grow. Besides, it's inevitable that another viral video phenomenon is just around the corner--and when that phenomenon spreads to iOS, Google finally will be in position to reap all the benefits.--Jason

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