Google owns user generated video on the internets via the youtube acquisition. I think they paid a very, very small price for this.
This profitless 'strategic' expansion at all costs mentality is exactly the management failure that's leads to stock price stagnation in mature tech companies like Microsoft and Google.
That's more how I view the Google situation. They make these profitless attempts at getting people on their sites, which then generates massive amounts of advertising profits for them.
The "strategic expansion" can also be spun as "category killer" management. What large business in their right mind would try to compete with YouTube at this point? VCs would scoff at anyone wanting to do a video-sharing startup now. It's a loss leader in the way Bing is to Microsoft or Cyber Monday is to Amazon: It grabs eyeballs.
Case in point, Susan Boyle's debut album was not heavily marketed in the US; and her performances were originally broadcast only in the UK but made famous through YouTube. The album went on to sell more than 6 million copies worldwide. That is reach and marketing (even when it's unintended). YouTube now strikes _actual_ marketing deals for its front page, and has actively stepped up inserted ads in a huge way this year. And, they've been very close to profitability this year.
All in good time, I suppose.
Google's existing advertising business works despite the low value of traffic because Google is collecting their cut from a huge swath of the Internet, and because the one kind of traffic they own - search - is the most directly linked to actually buying things, and thus the most valuable.
Youtube is almost the opposite - expensive to service and totally unrelated to monetizable actions.
If user-generated video is in any way tangentially important to the future of online advertising, then YouTube is worth more than their direct profit to Google.