Google's H.264 decision: It's all about YouTube costs

Everyone wants to boil down Google's decision to remove H.264 support from Chrome to be a religious one. To me, it's obviously infrastructure-related.

Ah, the smell of religious fervor in the morning. Do you smell it? That flame-war smell. It smells like... FORMAT WARS!

Google announced on its Chromium Blog on Tuesday that over the next few months, development builds of the Chrome browser would no longer support the H.264 video codec which is used in a wide variety of embedded video formats used on web sites all over the Internet.

Instead, Google will put its support behind the WebM (VP8) and Ogg Theora codecs, which are Open Source alternatives to H.264/MPEG-4, which is licensed by MPEG LA, LLC.

Now, I'm not going to get into the depth of the religious discussion of why Google decided to embrace one format over the other, especially since the licensing fees we are talking about are a drop in the bucket if you compare it to Google's overall annual revenue.

To me, this is not a format religion issue. Nor is it a licensing costs issue. And it's got very little to do with Chrome or a platform play. In my opinion, this is all about infrastructure costs.

Infrastructure build-out and optimization strategy is something I know a great deal about. It's what I do as my day job as an Infrastructure Architect at IBM -- understanding what our customers need to do in order to minimize their infrastructure overhead in terms of systems, storage, networking and facilities as they plan for further growth.

Google is a giant company which makes an awful lot of money. But that doesn't mean they are immune from infrastructure planning. If anything, it's got to be the number one item they look at on their balance sheet in terms of overall spending.

In Google's last form 10-Q that was filed with the United States Securities and Exchange Commission, which they posted on September 30th of 2010, the company doesn't outline in detail what the company actually spends in terms of line item detail on infrastructure.

But if you read between the lines, on page 26 of that report, under "Trends in Our Business" the impact of infrastructure cost and the cost of traffic acquisition on the company is crystal clear:

We continue to invest in systems infrastructures, increase our hiring, and adjust our compensation programs as required to manage our growth and develop and promote our products and services, and this may cause our operating margins to decrease. Acquisitions will also remain an important component of our strategy and use of capital, and we expect our current pace of acquisitions to continue. Our full-time employee headcount was 19,665 at September 30, 2009 and 23,331 at September 30, 2010. We expect our cost of revenues will increase in dollars and may increase as a percentage of revenues in future periods, primarily as a result of forecasted increases in traffic acquisition costs, data center costs, credit card and other transaction fees, content acquisition costs, and other costs. In particular, traffic acquisition costs as a percentage of advertising revenues may increase in the future if we are unable to continue to improve the monetization or generation of revenues from traffic on our websites and our Google Network members’ websites.

Now, what's one of the biggest cost centers at Google in terms of infrastructure? Next to the search business, it's YouTube.

The movement away from H.264 and to open formats such as VP8 and Theora is simply a canary in a coal mine.

The religious decision about what format they eventually chose is a red herring, a side discussion that simply detracts from the real issue -- It's all about Google coming to the conclusion that supporting all kinds of video formats at YouTube requires a large amount of infrastructure, which costs a great deal of money.

My guess is that the decision to eliminate H.264 not only applies to the Chrome browser for the PC, the Mac and Android Devices, but to also to the actual encoding of content stored in YouTube's Storage Area Networks (SANs).

Over the last few years, YouTube has utterly exploded in terms the size of their stored content, if not for the 800,000 funny cat videos alone.

In 2008, YouTube also began to support HD video, which dramatically increases the amount of infrastructure required. If you have to support content in different formats and in different resolutions, you're gonna need a much bigger boat.

I'm guessing that in capacity planning for the next several years of YouTube infrastructure expansion, the IT people at Google made a rough order of magnitude calculation for what they would need through 2013 and said "Holy Crap!".

Considering that YouTube probably accounts for most of the Web's streaming video traffic next to Netflix, I can understand why Google made the choice to rationalize its format support, starting with Chrome.

Eventually, in order to consolidate their infrastructure overhead, Google will need to transcode the entire YouTube library into a smaller subset of formats, and since they have to go through the painful effort of doing this anyway, they might as well do it with open formats that they control in which they are beholden to no-one.

A list of supported video formats on YouTube (Source: Wikipedia)

The less formats that they need to support, the less that they need to build out in terms of datacenters and storage. With YouTube, we're talking about exabytes upon exabytes of storage. Hundreds of millions of dollars or even billions worth of SAN hardware and facilities to house it.

So from the perspective of a secondary content provider and as developers of browser software, such as Apple and their Mobile Safari which runs on iOS, you can either continue to embrace H.264, or your can go with what YouTube uses.

My guess is that in addition to Android licensees, Apple and other device manufacturers which use embedded browsers such as RIM are not going to deny their customers and end-users embedded YouTube video support if Google chooses to encode to to a VP8/Theora standard, and I would expect the same of Microsoft and Internet Explorer and its embedded variations as well. Mozilla and Firefox we already know is completely on-board.

Is Google's H.264 to VP8/Theora transition motivated by religion, or about the real business of building out infrastructure to support YouTube? Talk Back and Let Me Know.

Disclaimer: The postings and opinions on this blog are my own and don’t necessarily represent IBM’s positions, strategies or opinions.