Google already has a music store! by Seth Weintraub @FortuneMagazine June 23, 2010, 1:23 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons It is called YouTube and they sell thousands of songs and more than a few videos every day. There was lots of talk yesterday about when or if Google will enter the online music sales business this week. I’m here to tell you they are already knee deep in the music sales game and have nowhere to go but deeper. When you do a Google search for a song, one of the top results is usually a YouTube clip. That video may be an officially licensed music video (as below), a live performance, a pirated video, or just the song with a still image or slideshow. But most of the time, there is an advertisement to buy the song currently playing (or a related tune) that pops up below the video. Google makes money from that music. That is a store. Here’s the current number one song in Amazon and iTunes Music stores: ‘California Gurls’ As of today, it has received 4 million views and 32,000 comments. It is just a week old, it was uploaded on June 15. That translates to seven views per second since it was uploaded — morning, noon, and night. And those 4 million viewers were given the option to buy the song at the bottom of the video. Amazon ($.99) is the default link and Apple’s iTunes ($1.29) is in the drop down. Think of YouTube as the store and Amazon and iTunes as fulfillment centers. If Google is only making what typical affiliate linkers make on those links, every music sale is netting them around $.10. If they sell one million songs in this fashion, that is around $100,000 in revenue for hosting popular content. Does Google bring in this amount of money per week? Per day? Per hour or per second? There is no way to currently tell. Typical affiliate link payouts for Amazon MP3 Why navigate iTunes or Amazon to listen to a snippet of a song when you can have a full music video experience on YouTube? There is a lot of music out there and Google is rapidly becoming the place to find it. That’s a stark contrast to just a few years ago. Music companies used to spend time and money pulling their own content from YouTube. Now, it is the best way on earth to promote their music. They now fight piracy by uploading higher quality versions of hit songs to YouTube and making money from sales. MTV for the 2010’s? The current top 10 on iTunes are all on YouTube. All with pay purchase links. See for yourself: California Gurls (feat. Snoop Dogg)Katy Perry OMG (feat. will.i.am)Usher Cooler Than Me Mike Posner Find Your Love Drake My First Kiss (feat. Ke$ha)3OH!3 Your Love Is My Drug Ke$ha Ridin’ Solo Jason Derülo Rock That Body Black Eyed Peas Dynamite Taio Cruz Round & Round Selena Gomez & The Scene The top 10 from 20 years ago are there too. In fact, you can find plenty of music that might never find its way onto iTunes on YouTube. Affiliate links aren’t the only way Google can monetize music. By becoming the hub and host of music videos, they can syndicate to other services. Vevo, a joint venture between two of the largest media companies in the world, Sony and Universal, is putting most of their music on YouTube. Most of the top 10, above, is from Vevo. But, like everyone is saying, this isn’t Google’s whole music package. There is much more money to be made by helping the labels host and catalog their music. The music industry wants all the help it can get to escape the clutches of Apple’s iTunes. That is ‘Google Music’. That mobile music service Google presented at I/O above? There was no Amazon or iTunes in that (at least not visibly). How does Google get there? I don’t see Google embracing the ‘traditional iTunes model’ that has netted Apple something like 10+billion songs downloaded. That’s not Google. iTunes is curated to death and requires dedicated applications — at least currently. Google is all about the Web. Every ‘official YouTube video’ that the studios upload also has a music data file built into it. The music companies stopped wrapping their songs in DRM a while ago, so this data music/video file that Google has could be sold as an MP3 or an MP4 video with a flick of a couple of switches and a go-ahead from the labels. Google already has a payment system, Google Checkout, which is just waiting for its chance to take on PayPal, Amazon, and iTunes. So instead of sending hundreds of thousands of people through iTunes and Amazon fulfillment, Google does the job right there and takes a bigger cut. That’s what Google showed off at Google I/O for Android and is probably only a few music industry contracts away from going live. Google has other ways of making money off of music as well. You may notice that pre-mercials appear before some music on YouTube. There’s your free music streaming service. One that could take on or at least compete with the wildly-successful Pandora. Premium subscriptions could be bought for a monthly fee and be advertisement free to take on Spotify’s model. And that’s just the tip of the iceberg. YouTube music videos are embeddable into other web pages, so bloggers, Facebook users, and other website owners are encouraged to legally put YouTube music on their site for free. That means Facebook users and bloggers are opening thousands of new storefronts for Google’s Music service every day. Another service, YouTube’s AudioSwap, let’s you add commercial music to your personal Youtube videos in their editing suite. In exchange, Google puts an ad below your video that lets the watchers buy the music directly from your home movies. Annoying, perhaps, but effective, and it gives users license to use popular music in public-facing movies. And it isn’t just music sales that will flow through YouTube. YouTube is already renting movies as well. While it hasn’t achieved the kind of success that Netflix or Amazon VOD have achieved, the model where movies are free with ads has been pretty successful over the past 30 years on another medium called TV. In fact, Google might want to add this function to another product that will marry these features called GoogleTV.