Google - Not So Smart After All?

Edit: Here, as well, I'm duping what N already posted. I warned that I got all my material from N, but this is just silly.

Google buying YouTube makes no sense. Then again, they're the gazillionnaires and I'm not - it's quite possible that I'm missing something critical here. Still, I doubt it.

For those of you that missed it, Google bought YouTube for $1.65 billion. That's a lot of money, but since YouTube has managed to remain on top of the video sharing pile even with some serious competition, the YouTube brand/feature set/whatever has become very valuable.

Exactly why YouTube is valuable, though, is a mystery to me. The RIAA, MPAA et al must be licking their chops right now, thinking of the huge amount of money they can sue Google for. YouTube didn't used to be an attractive target for litigation because, frankly, there was little confidence that legal action would result in a payout.

Then there's the fact that YouTube is a big time money pit. It is speculated that YouTube's monthly loses on bandwidth alone now exceed several million dollars. YouTube employs 67 employees in a company that doesn't have a clear business model. Advertisers are wary of signing with YouTube because they don't want their brand to be associated with the vast amount of the (tasteless) content that exists on YouTube.

So YouTube is a liability legally and financially. What's more, because of the reason stated above as well as by the nature of the content YouTube serves, there's no clear way that YouTube's acquisition will actually help Google in the only way that really matters - selling ads. Adwords is the big money-maker for Google - "Ads Everywhere" is just as appropriate a motto for the company as "Don't be Evil." How is acquiring YouTube going to help Google serve better, more targeted search results and ads to its users?

Could it possibly be that Google is simply buying YouTube in order to take a competitor to its own video service off the acquisition market, increasing the cost for any other potential buyers (Disney, News Corp., Yahoo) to develop rival services? If so, is video content on the Internet, in the manner delivered by YouTube, that intrinsically valuable?