Google Video marketplace closure fallout

August 14, 2007
by Latitude

As you may have heard, Google has just shut down its video marketplace. This was supposed to be Google’s answer to the brisk sales of television shows that Apple was doing with iTunes. But as the Google service did not get much attention, and no sales news ever touted, it is understandable if you didn’t even realize the video marketplace existed.

But the reason Google waited till Friday afternoon to announce the shutdown may be the story within the story, which is bigger and more significant.

Remember, they had all these partners signed up who were going to sell video content via Google? It seemed pretty pointless at the time and the near total failure of the video sales to take off simply confirmed it. One of the key points that seemed particularly poorly thought out was the decision to create yet another type of DRM that would require the content you bought to call home every time you wanted to play it.

In other words, if Google were ever to kill their video service, all those videos people bought would simply no longer be available to them. Which is precisely what has now happened.

Google’s solution to this? Giving customers whose property has now disappeared a handful of credits for Google Checkout. (Perhaps more astonishingly, after greeting the customer as “a valued Google user,” the pro forma email informing them of the shutdown tells the customer that the compensation being offered must be used within 60 days.) TechCrunch editor Mike Arrington is spot-on when he concludes:

It’s a mistake not to fully refund every dollar in video purchases. Users are going to be hesitant to try out Google services in the future if they can’t believe that something they are buying is really theirs to keep.

This may prove hugely problematic to Google if it intends to diversify its revenue sources way beyond paid search and into an offering of services for individual customers. Perhaps worse, it communicates to the user that any transaction carried out with Google is not done so in good faith by the search giant.

Google is already battling image problems, privacy concerns, and whispers that they are not to be trusted. As for being evil, this episode may not be bad enough to be described in such strong terms, but customers could be forgiven for considering it foreshadowing of what’s to come.

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