Official: Google Buys YouTube for $1.65 Billion, Grabs Lead in Web Videos

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Jon

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Oct. 9 (Bloomberg) -- Google Inc., the most-used Internet search engine, agreed to buy YouTube Inc. for $1.65 billion, adding the largest video-sharing site on the Web and an audience that watches more than 100 million clips a day.


Founders Chad Hurley and Steve Chen and their 65 employees will join the company, Google said today in a statement distributed by Business Wire. In less than two years, San Bruno, California-based YouTube has catapulted from startup to Internet icon with 34 million monthly U.S. visitors.


The stock purchase, Google's largest, underscores the pressure on the Mountain View, California-based company from startups such as YouTube and friend-finder Facebook.com, which are creating new markets for film clips and social networking. The acquisition also builds on Google's strategy to add more content to attract advertisers.


``YouTube has huge traffic and is able to reach and appeal to a whole new set of potential viewers,'' Scott Kessler, an analyst at Standard & Poor's in New York, said before the announcement. ``That's the key.''


In total visitors, the purchase vaults Google to second place among U.S. Internet companies from third. The two brands combined had 101 million visitors in August, according to Nielsen//NetRatings. Yahoo! Inc. sites had 106.7 million and Microsoft Corp.'s MSN Internet division had 98.5 million.
Shares of Google rose $8.50 to $429 at 4 p.m. New York time in Nasdaq Stock Market composite trading. They have risen 3.4 percent this year.


Spending more than $1 billion on an acquisition is a departure for Google, which has typically bought smaller startups such as mapping software maker Keyhole Corp. and Upstartle, creator of a Web-based word processor. Google had $9.82 billion in cash and marketable securities as of June 30 and generated sales of $6.14 billion in 2005.


YouTube's business fits Google's strategy of using Internet content as a platform to sell ads. In December, Google agreed to buy 5 percent of Time Warner Inc.'s AOL to show ads to AOL search users. Google agreed in August to provide search and keyword advertising for News Corp.'s MySpace.com.
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Read the rest of the article HERE on Bloomberg.com
 


Imagine going from making nothing, to getting your hands on at least $530M?! Jesus Christ that's one sweet payday! Eat your heart out Tom and Myspace!
 
What did Tom take away from the Myspace deal anyways? Like 20 or 30 million?
 
wow big news. i seriously didn't think youtube would go for more than a billion.

what do people think about facebook now?
 
Michael_Goldman said:
Something tells me its not good news for us adsensers..
This may brings lots of cheap traffic to adsense and overall more pageviews for adwords ads - which is mor competition over high bids ...
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It's not going to make a bit of difference. Adsense has always been running on YouTube -- only now Google gets the entire cut.
 
You have to look at the bigger picture.

Google is picking up leverage to go against traditional media.
YouTube + Google Video = millions of videos and a huge following
Most people wouldn't mind ditching stupid midday soap operas to watch amateur (but amusing) videos online
 
YouTube is an easy market, it's got the potential to be fucking massive compared to anything else out there.. There's no way you can compare it to the lame Facebook.

I've personally purchased advertising on the Facebook, and it was by far one of the worst and most overly inflated and over hyped ad campaigns I had ever run. I was running a custom site that was giving away free super bowl tickets. It was a basic lead signup, about 4-5 general fields, did amazing on Adwords and Yahoo. I figured I'd test it with the big college football schools. Ran the campaign for 2 weeks..
Total leads = zero
Total clicks = 3
Amount spent = over $1k

Comparing that to adwords, where I was bidding on very similar niches, the ROI was like 5:1.

I've heard from plenty of others, Facebook blows. All they have going for them is that they are the hub for college kids to communicate with one another without the annoying feel and ads of myspace. Other than that, their advertising absolutely blows, and the owners of it are fucking idiots if they think they can turn down two huge offers in hopes for a Google buyout of $3 Billion. Those guys are fucking dreaming. Turning down that $2B offer from Yahoo was suicide. All Google has to do is make an offer for $1 MILLION.. not BILLION, and they will automatically lose all respect and any possibility of banking like they had hoped to do so.

I really want to see the Facebook sell for $10M or less.

If I owned FaceBook, I would turn it from losing cash or breaking even, to a cash cow powerhouse. Easy shit to do.
 
i wasn't comparing to facebook. i was more or less mocking them...i've advertised through facebook before. yeah i know it totally sucks. shit load of impressions, few clicks, no good conversions. I didn't spend $1k, but still loss of money over nothing.

$10M haha, if that happens that would be hilarious.
 
youtube dosen't make any profit so it was way over priced, they could have got it for a lot cheaper. In the long term I think its a good deal for google as they know how to monitise it also they have cut out msn, yahoo etc.. from the video market. Its also imporatant to note that google was sitting on a cash pile of 10 billion so were under pressure to spend.
 
Damn that is some cash. YouTube and Google Video were like the main competitors, now they are the same. Still better be the same if not better quality and amount of videos being added to YouTube everyday.
 
L146705 said:
youtube dosen't make any profit so it was way over priced, they could have got it for a lot cheaper. In the long term I think its a good deal for google as they know how to monitise it also they have cut out msn, yahoo etc.. from the video market. Its also imporatant to note that google was sitting on a cash pile of 10 billion so were under pressure to spend.
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Well, Google paid almost 3x what MSN was offering. But then again, MSN wasn't looking to buy it, just sign an advertising deal.
 
L146705 said:
youtube dosen't make any profit so it was way over priced, they could have got it for a lot cheaper. In the long term I think its a good deal for google as they know how to monitise it also they have cut out msn, yahoo etc.. from the video market. Its also imporatant to note that google was sitting on a cash pile of 10 billion so were under pressure to spend.
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I know most of the reports out there say YouTube doesn't make any money but the reality is nobody knows for sure except YouTube. I'm guessing they already do. They were only backed with $15m and haven't required any more capital. With 100m videos viewed a day that is a shitload of eyeballs and clicks. I think they are starting to get in the black with the increase in traffic and advertising deals. This article estimates YouTube is pulling in $175,000 a day just from the home page ($5m a month) plus another $75,000 a day in other display ads for a total of $7.5M per month in revenues. Another analyst has pegged YouTube to do $112m next year. I'm sure this would easily cover all the bandwidth costs at these rates.

I agree it's a good deal for google since their market cap increased over $2B just the last week -- so this is a drop in the bucket for them and gets them the #1 video site instantly. Plus, I'm sure their network has enough room to add YouTube's without any major costs involved.

Btw, MSN is working on their YouTube version called "SoapBox" -- we'll see how that does http://soapbox.msn.com/

Microsoft just seems to always be behind in the internet sector. They just don't get it or don't want to. They could have easily purchased YouTube instead they are going to try and build something from scratch that is already 2yrs behind. The consumer has already decided that YouTube is going to be THE video destination with a 50% market share. It's almost impossible at this point to make people switch a service. It's like when everyone tried to enter the auction business to compete with ebay. There were better services than ebay but they already had the audience.
 
pocketrockets said:
Btw, MSN is working on their YouTube version called "SoapBox" -- we'll see how that does http://soapbox.msn.com/

Microsoft just seems to always be behind in the internet sector. They just don't get it or don't want to. They could have easily purchased YouTube instead they are going to try and build something from scratch that is already 2yrs behind. The consumer has already decided that YouTube is going to be THE video destination with a 50% market share. It's almost impossible at this point to make people switch a service. It's like when everyone tried to enter the auction business to compete with ebay. There were better services than ebay but they already had the audience.
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Maybe. But remember Microsoft wasn't first in browsers either. And they have 80% marketshare. They weren't first to online gaming. Now they have widely successful Xbox Live service that's expanding to PCs and cellphones in a year or two. Microsoft still has a ton of cash to throw around so I think they can gain marketshare of the video industry if perhaps they gobbled up some of the smaller video sites. I bet they will end up a close second.
 
pocketrockets said:
I know most of the reports out there say YouTube doesn't make any money but the reality is nobody knows for sure except YouTube. I'm guessing they already do. They were only backed with $15m and haven't required any more capital. With 100m videos viewed a day that is a shitload of eyeballs and clicks. I think they are starting to get in the black with the increase in traffic and advertising deals. This article estimates YouTube is pulling in $175,000 a day just from the home page ($5m a month) plus another $75,000 a day in other display ads for a total of $7.5M per month in revenues. Another analyst has pegged YouTube to do $112m next year. I'm sure this would easily cover all the bandwidth costs at these rates.
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That article doesnt take into count that a large percentage of youtubes 100mill videos a day are streamed on other websites not youtube itself.
 
DruSam said:
Maybe. But remember Microsoft wasn't first in browsers either. And they have 80% marketshare. They weren't first to online gaming. Now they have widely successful Xbox Live service that's expanding to PCs and cellphones in a year or two. Microsoft still has a ton of cash to throw around so I think they can gain marketshare of the video industry if perhaps they gobbled up some of the smaller video sites. I bet they will end up a close second.
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Yeah, but browsers don't make money (Mozilla Corporation make $$ because of the Google search box in the browser) And Xbox Live is indeed popular, it loses a significant amount of money on each Xbox. It has been estimated that the Xbox division has lost Microsoft around $4Billion dollars since 2001. Damn. $4B! They lost [SIZE=-1]$1.26 billion for the fiscal year 2006 alone![/SIZE]

They could have bought the web's hottest property for that and already started to make a profit with it!
 
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