Will YouTube become the Akamai of video?

The decision to expand YouTube's application programming interfaces is the smartest move by management since it agreed to lighten Eric Schmidt's wallet to the tune of $1.6 billion in 2006.

With the announcement, developers get more direct access to the service while it also facilitates the proliferation of so-called "chromeless" players without the traditional YouTube interface and branding.

Eric Schmidt: YouTube everywhere? Why not?

(Credit: Dan Farber)

I don't want to get all giddy on you but this is a big deal. Instead of promoting YouTube as a destination site, this lays the groundwork for YouTube's transformation into a video service. If it goes according to plan, the world starts building gobs more video products using YouTube's infrastructure. YouTube's corporate parent, Google, thus becomes the host for that much more of the world's video. (Think about what that suggests in terms of indexing and monetizing potential.)

YouTube's not alone in thinking about how it can reinvent itself as a technology platform. Steve Rubel, who writes the Micro Persuasion blog, nails it:

The leading players on the Web all see the train coming. They are wisely creating APIs and turning themselves into plug-and-play services, not just big destinations. YouTube is just the latest to do so today. Amazon has S3. Google has OpenSocial and an extensive library of APIs. As does Microsoft. Facebook is allowing its applications to live outside the site. Twitter is an API first and (eventually) a business model second. Finally, the booming widget economy shows the promise of small content that can go anywhere.

Dan Frommer over at Silicon Valley Insider has it right when he writes:

If you work YouTube's new services into your Web site, your visitors can upload video directly to YouTube without leaving your site. You keep the page views--and their attention--and don't have to pay for video hosting. Google, in turn, can presumably sell ads on your content. (Today's announcement doesn't say anything about ads/revenue sharing, so we're assuming Google keeps all of the ad revenue in exchange for the free service.)

So what could screw this up? I can think of only one potential hitch. There are still a lot of bad feelings dividing content creators from Google/YouTube over copyright violation disputes. And don't forget that Viacom's $1 billion lawsuit hasn't even entered the discovery stage.

Call it an educated hunch but I'm betting Google will try to cut a deal before that lawsuit ever gets close to going before a judge. After it reached a settlement in its antitrust case with the government, Microsoft spent billions to resolve lingering litigation against archenemies. That was coin well spent and it allowed Microsoft to get on with its business.

YouTube's a social phenomenon that's only getting bigger. Google knows what's at stake.