[Editor’s note: We asked Kevin Laws, a former blogger at VentureBlog, to comment on the Google-YouTube merger. Here are his thoughts. Keep in mind that his company, Vast, can be seen as a competitor to Google Base]

Google purchased YouTube for more than a billion dollars. That “pop” you hear is not the end of the Web 2.0 bubble, but the end of the Google Myth.

The Google Myth is simple: to produce good businesses, hire the best engineers and leave them alone except for occasional priority setting. Most recently, engineers have been forwarding around this post from Steve Yegge, which contains an overview of Google’s management practices – admittedly, Nirvana for engineers. More than any other company, Google has promoted the myth that these practices produce good businesses.

Don’t get me wrong – good engineers, left alone with the right culture, can do great work. This is particularly true if they are the users of their own products and they have no partners or customers relying on strict deadlines. In consumer Internet, that’s largely true, and Google has some products that delight me. I use Google Maps, have a Gmail account, and use Gtalk.

All are great products, but none are very good businesses. Each has a tiny fraction of the market. “Who Will Win the Map Wars? Google or MSN” was the question people were asking recently. How about MapQuest or Yahoo, who between them have over 70% of the market – up from last year? Are you a Gmail user? Good, you can join the other 3% of people who are. Yahoo Mail added more users last year than Google’s entire user base. Gtalk? Great, enjoy talking to the other 44 thousand people using it regularly, or you could use AIM or Skype with over 40 million. In market after market, Google has made an innovative product and forced the other guys to improve. I thank them for that, but even after many years, the products have not turned into businesses.

Where Google does have good (ok, fantastic) businesses – search and Adwords/Adsense – the management techniques are less loose by necessity. Management takes a far stronger role in setting priorities. Google’s additional products are merely PR, done for the buzz.

That’s great for Google, because it keeps their name in front of you and keeps you using their search product. Those methods are not so great for the rest of us who rely on products to build businesses. The more pedestrian incremental features needed to create a business – the stuff the engineers hate – are left behind at Google.

With the purchase of YouTube, Google is admitting the Google Myth is false. Google already has a video service platform and the engineers to out-do YouTube technically. Instead, Google is buying YouTube for over a billion dollars. Now that Google’s management believes video is an actual business, they are looking outside Google’s engineering culture to build it.

The myth that a good product by itself is sufficient, so engineers should be set free from business folks, just went “pop”. Google joined the rest of us who are still searching for that ideal balance between business needs and the freedom needed by creative talent. Welcome to the real world, Google, and good luck keeping your best talent as you transition more of your products to businesses.

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