Topic: Google snaps up YouTube for $1.65B

Google snaps up YouTube for $1.65B

SAN FRANCISCO - Google Inc. is snapping up YouTube Inc. for $1.65 billion in a deal that catapults the Internet search leader to a starring role in the online video revolution.

The all-stock deal announced Monday unites one of the Internet's marquee companies with one of its rapidly rising stars. It came just hours after YouTube unveiled three agreements with media companies in an apparent bid to escape the threat of copyright-infringement lawsuits.

The price makes YouTube, a still-unprofitable startup, by far the most expensive purchase made by Google during its eight-year history.

Although some cynics have questioned YouTube's staying power, Google is betting that the popular Web site will provide it an increasingly lucrative marketing hub as more viewers and advertisers migrate from television to the Internet.

"We are natural partners to offer a compelling media entertainment service to users, content owners and advertisers," said Eric Schmidt, Google's chief executive officer.

YouTube will continue to retain its brand, as well as all 67 employees, including co-founders Chad Hurley and Steve Chen. The deal is expected to close in the fourth quarter of this year.

"I'm confident that with this partnership we'll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide," said Hurley, YouTube's 29-year-old CEO.

While most videos posted on YouTube are homemade, the site also features volumes of copyrighted material - a problem that has caused some critics to predict the startup eventually would be sued into oblivion, much like the once-popular music-sharing site Napster.

But Hurley and Chen, 27, have spent months cozying up with major media executives in an effort to convince them that YouTube could help them make more money by helping them connect with the growing number of people who spend most of their free time on the Internet.

While Google has been hauling away huge profits from the booming search market, it hasn't been able to become a major player in online video.

That should change now, predicted Forrester Research analyst Charlene Li. "This gives Google the video play they have been looking for and gives them a great opportunity to redefine how advertising is done," she said.

Investors applauded the possible acquisition as Google shares climbed $8.50, or 2 percent, to close at $429 on the Nasdaq Stock Market.

Several other suitors, including Microsoft Corp., Yahoo Inc. and News Corp., reportedly have discussed a possible YouTube purchase in recent weeks.

"This deal looks pretty compelling for Google," said Standard & Poor's analyst Scott Kessler said. "Google has been doing a lot of things right, but they are not sitting on their laurels."

Google's YouTube coup may intensify the pressure on Yahoo to make its own splash by buying Facebook.com, the Internet's second most popular social-networking site. Yahoo has reportedly offered as much as $1 billion for Palo Alto-based Facebook during months of sporadic talks.

"Yahoo really needs to step up and do something," said Roger Aguinaldo, an investment banker who also publishes a dealmaking newsletter called the M&A Advisor. "They are becoming less relevant and looking less innovative with each passing day."

Selling to Mountain View-based Google will give YouTube more technological muscle and advertising know-how, as well as generate a staggering windfall for a 67-employee company that was running on credit card debt just 20 months ago.

Since Hurley and Chen founded the company in February 2005, YouTube has blossomed into a cultural touchstone that shows more than 100 million video clips per day. The video library is eclectic, featuring everything from teenagers goofing off in their rooms to William Shatner singing "Rocket Man" during a 1970s TV show. The clips are submitted by users.

YouTube's worldwide audience was 72.1 million by August, up from 2.8 million a year earlier, according to comScore Media Metrix.

YouTube's conciliatory approach with major media has recently yielded several licensing and promotional agreements that have eased some of the copyright concerns while providing the company with some financial breathing room until it becomes profitable.

To conserve money as it subsisted on $11.5 million in venture capital, YouTube had been based in an austere office above a San Mateo pizzeria until recently moving to more spacious quarters in nearby San Bruno.

As its negotiations with Google appeared to near fruition, YouTube on Monday announced new partnerships with Universal Music Group, CBS Corp. and Sony BMG Music Entertainment. Those alliances followed a similar arrangement announced last month with Warner Music Group Inc.

The truce with Universal represented a particularly significant breakthrough because the world's largest record company had threatened to sue YouTube for copyright infringement less than a month ago.

Li and Kessler expect even more media companies will be lining up to do business with YouTube now that Google owns it.

"It's going to be like, 'You can either fight us or you can make money with us,'" Li predicted.

Re: Google snaps up YouTube for $1.65B

It's crazy! I didn't believe it until I read about it on google.com.

"Programming is like sex: one mistake and you have to support it for the rest of your life."

3

Re: Google snaps up YouTube for $1.65B

What I gather is that it's not the technology, it's the name recognition and eyeballs that Google is buying.

But I agree, it's getting as crazy as it was in the late 90's.

4

Re: Google snaps up YouTube for $1.65B

YouTube is already on the Top10 list of the biggest sites in the world.
Another thing that makes YouTube unique, is the amount of time spent there by each user, it's 5-20 times as long as on a regular website.
I actually think Google made a bargain buy at that price!

Check out www.alexa.com for stats, look up YouTube, it's impressive!

Re: Google snaps up YouTube for $1.65B

wow

Re: Google snaps up YouTube for $1.65B

Google will take over the world and we will like it.

~James
FluxBB - Less is more

Re: Google snaps up YouTube for $1.65B

I support google definately. Most people have no idea how much they're doing.

Google search itself has: video, music, web, images, maps, code, desktop, earth, Picasa, sketch up, calendar, Gmail, and a ton load more.
Google owns Blogger
Google owns YouTube now.

There is rumours of google developing a browser (and some even of an operating system!)


Google's slogan is: "Don't be evil." I didn't believe it for the longest time... <_<


Anyways Google is going to completely pwn microsoft and I'm going to like it even if everyone else won't admit to liking it. big_smile

Re: Google snaps up YouTube for $1.65B

Endre wrote:

Another thing that makes YouTube unique, is the amount of time spent there by each user, it's 5-20 times as long as on a regular website.

Which is quite logical, as videos usually take a while tongue

Re: Google snaps up YouTube for $1.65B

cant imagine a internet life without google smile

God wisely designed the human body so that we can neither pat our own backs nor kick ourselves too easily

Re: Google snaps up YouTube for $1.65B

YouTube co-founder says site to share revenue with users in coming months

DAVOS, Switzerland (AP) - Chad Hurley, co-founder of YouTube, said Saturday that the wildly successful site plans to start sharing revenue with its millions of users.
Hurley, who along with the site's co-founders sold YouTube to Google for US$1.65 billion in November, said one of the major innovations the site is working on is a way to allow users to be paid for content.
"We are getting an audience large enough where we have an opportunity to support creativity, to foster creativity through sharing revenue with our users," Hurley said at the World Economic Forum. "So in the coming months, we are going to be opening that up."
Hurley gave no details of how much users would be paid, or what mechanism would be used