Google acquires YouTube for $1.65 billion

Update: Christopher Coulter just called this the “GooTube” merger. Heheh.

Wow, Google just sent me a press release that says it’s true. It has acquired YouTube for $1.65 billion in stock (update: sorry for the typo, I said millions earlier). Here’s the press release — congrats to everyone involved, and thanks to Google’s PR department for getting all journalists and bloggers this info at the same time. Great improvement over last press release.

TechMeme is going crazy about this news.

Will this work out for Google? I think it will. First of all, it makes Google a more interesting company to watch. Second of all, it makes it very clear to advertisers that Google is in the video business big time. This has caught the attention of all the big media buyers at places like General Motors and Procter and Gamble. These folks spend billions on advertising.

Now, will Google get sued over and over? Probably. But if you think that matters then you are missing the point. Did Microsoft’s legal troubles slow down its cash generation machines? No. Neither will Google’s. Plus, Google has demonstrated it’s fairly adept at working out deals with folks who produce content, or own it. Yeah, they’ll probably lose a few battles in court, but that’s like losing a battle or two but winning the war.

I do note that Google’s stock is up. Yahoo and Microsoft’s are down.

Another angle? Google is getting over its initial engineering-driven arrogance. You know the kind. Where when you show engineers/geeks/developers something like YouTube they answer “we can build that in a few weeks.”

I heard that over and over again at Microsoft and my friends at Google say it a lot too. It’s called “not invented here” syndrome. The fact that someone told the Google Video folks to sit down and be quiet during this deal is pretty significant. That’s a sizeable change from previous times when Google was looking to acquire companies.

It also means that the price for new companies has just gone up dramatically and that the venture capital barn door is gonna totally unlock as investors chase down “flip to big company” deals. I’m not saying there will be another YouTube, but investors get ancy when they see other people making big bucks.

Update: My brother, Alex, just IM’ed me: “another missed opportunity for microsoft.” Exactly. What are those bean counters doing with all that money? I guess they want the entire advertising world to go to Google, huh?

Comments

  1. may want to update your post – it’s 1.65B as in billion not 1.65M :) if it was the latter i’m sure others would pony up their savings if that’s all it cost…

  2. may want to update your post – it’s 1.65B as in billion not 1.65M :) if it was the latter i’m sure others would pony up their savings if that’s all it cost…

  3. Er you have some errors with the price.

    It’s $1.65 billion, not million but even that’s closer than the buck sixty-five you list in the title :-)

  4. Er you have some errors with the price.

    It’s $1.65 billion, not million but even that’s closer than the buck sixty-five you list in the title :-)

  5. Brem: Cuban is just jealous that he isn’t behind this deal. I think long term this makes a lot more sense than Yahoo buying Cuban’s company.

    Not to mention that it makes Google interesting again. We were all getting a bit bored with Google. Even stopped calling them “the new evil.” Now this makes us all pay attention again, for better or for worse.

    And having two competitive teams in the same company? You do remember the last company that did that, don’t you? Yeah, it was Microsoft, and that internal competition kept employees on top of their games.

  6. Brem: Cuban is just jealous that he isn’t behind this deal. I think long term this makes a lot more sense than Yahoo buying Cuban’s company.

    Not to mention that it makes Google interesting again. We were all getting a bit bored with Google. Even stopped calling them “the new evil.” Now this makes us all pay attention again, for better or for worse.

    And having two competitive teams in the same company? You do remember the last company that did that, don’t you? Yeah, it was Microsoft, and that internal competition kept employees on top of their games.

  7. Advertising going to Google is bad. The mindshare that Google gains off of this is worse. Microsoft screwed the pooch HUGE by not buying YouTube. It will take them years, if ever, to try and mechanically create the YouTube brand awareness at anything close to its current level.

  8. Advertising going to Google is bad. The mindshare that Google gains off of this is worse. Microsoft screwed the pooch HUGE by not buying YouTube. It will take them years, if ever, to try and mechanically create the YouTube brand awareness at anything close to its current level.

  9. Robert: I agree with you (I don’t know about Cuban being jealous or not… I know I’m jealous of his millions personally hehe).

    Basically, I see it as Google deciding not to keep investing tons of money for Google Video becoming “better” than YouTube, an almost impossible feat in a short term period, so basically, it meant lots of investment for a “possible” future return. With the buy, they secure both teams. For now. Basically, it was a choice of where to put the money. Google Videos? YouTube. No brainer here.

    Now, I don’t know about numbers. Is it too much? well… when we go beyond millions, it’s kind of hard to grasp value. Don’t you agree?

    If I was a YouTube employee or owner, I’d feel damn great today.

  10. Robert: I agree with you (I don’t know about Cuban being jealous or not… I know I’m jealous of his millions personally hehe).

    Basically, I see it as Google deciding not to keep investing tons of money for Google Video becoming “better” than YouTube, an almost impossible feat in a short term period, so basically, it meant lots of investment for a “possible” future return. With the buy, they secure both teams. For now. Basically, it was a choice of where to put the money. Google Videos? YouTube. No brainer here.

    Now, I don’t know about numbers. Is it too much? well… when we go beyond millions, it’s kind of hard to grasp value. Don’t you agree?

    If I was a YouTube employee or owner, I’d feel damn great today.

  11. [...] Now, it’s worth noting that this is Google biggest acquisition to date ($1.65 Billion in stock) and that when Google pays attention to something it’s typically worth taking note yourself. Meaning what, exactly? Well, this is BIG. Google is basically saying that they want to jump into the video fray badly enough to endure the lawsuits that are sure to pile up with their new acquisition, and though those lawsuits are merely lost battles in a winning war, it still speaks volumes about the value of consumer created content in the form of video. In short, if you’re looking for a new job, get your professional video profile up and running, dammit! While most folks out there are creating a bunch of video garbage (it still amazes me what gets noticed on YouTube), there is clearly “traction” in this arena and recruiters and HR departments are paying attention. Like it? Bookmark it!These icons link to social bookmarking sites where readers can share and discover new web pages. [...]

  12. How does this raise company prices dramatically? YouTube was the meteor – combining technical innovation with a large user base. I’m not an expert, but I don’t think this combination is being replicated elsewhere.

  13. How does this raise company prices dramatically? YouTube was the meteor – combining technical innovation with a large user base. I’m not an expert, but I don’t think this combination is being replicated elsewhere.

  14. Please join us in the collaboratively filtered realtime discussion:

    TOPIC: google youtube

    START TIME:

    2006-10-10 , 00:00 CEST (Brussels, Paris, Rome, Madrid, Stockholm).
    2006-09-10 , 23:00 BST (London, Dublin, Lisbon).
    2006-09-10 , 18:00 EDT (New York, Detroit, Toronto, Montreal).
    2006-09-10 , 15:00 PDT (Vancouver, Los Angeles, Tijuana, Yukon).

    TO JOIN:

    go to the following url:

    https://www.synthetron.com/account/tag/conversation/googleyoutube

    Confirm [yes] to the security warning and follow the instructions.
    (In some companies a proxy login dialog box will appear. You then need to type your company internet username and password).

    YOU NEED:

    A Java plugin installed on your browser.

  15. Please join us in the collaboratively filtered realtime discussion:

    TOPIC: google youtube

    START TIME:

    2006-10-10 , 00:00 CEST (Brussels, Paris, Rome, Madrid, Stockholm).
    2006-09-10 , 23:00 BST (London, Dublin, Lisbon).
    2006-09-10 , 18:00 EDT (New York, Detroit, Toronto, Montreal).
    2006-09-10 , 15:00 PDT (Vancouver, Los Angeles, Tijuana, Yukon).

    TO JOIN:

    go to the following url:

    https://www.synthetron.com/account/tag/conversation/googleyoutube

    Confirm [yes] to the security warning and follow the instructions.
    (In some companies a proxy login dialog box will appear. You then need to type your company internet username and password).

    YOU NEED:

    A Java plugin installed on your browser.

  16. I can’t believe MS let this one slip by. The perfect component to their “Live Anywhere” strategy. The almost-perfect unlimited source of content for Zune.

    Unbelievable.

    But the good news is, the “we don’t need that” arrogance usually corrects itself in about 2-5 years…it becomes “oh yeah, we really NEEDED that” ;)

  17. I can’t believe MS let this one slip by. The perfect component to their “Live Anywhere” strategy. The almost-perfect unlimited source of content for Zune.

    Unbelievable.

    But the good news is, the “we don’t need that” arrogance usually corrects itself in about 2-5 years…it becomes “oh yeah, we really NEEDED that” ;)

  18. I hope they combine the best features of Google Video & YouTube. It would be great if YouTube would let you download videos the same way Google Video does.

  19. I hope they combine the best features of Google Video & YouTube. It would be great if YouTube would let you download videos the same way Google Video does.

  20. Hey–I just called it GooTube on my blog, too! I guess it doesn’t take much of an immagination to figure that one out (or maybe a lot of immagination in the wrong direction).

    Anyway, I just wrote up about this on my blog (www.etechatwork.com), but if you want some really cool insight about “what it means”, check out Charlene Li’s blog:
    http://blogs.forrester.com/charleneli/2006/10/google_youtube_.html.

    If you’re interested, also check out my interview with Scoble while you’re there:
    http://etechatwork.com/blog/_archives/2006/10/4/2388072.html

  21. Hey–I just called it GooTube on my blog, too! I guess it doesn’t take much of an immagination to figure that one out (or maybe a lot of immagination in the wrong direction).

    Anyway, I just wrote up about this on my blog (www.etechatwork.com), but if you want some really cool insight about “what it means”, check out Charlene Li’s blog:
    http://blogs.forrester.com/charleneli/2006/10/google_youtube_.html.

    If you’re interested, also check out my interview with Scoble while you’re there:
    http://etechatwork.com/blog/_archives/2006/10/4/2388072.html

  22. Couplea points everyone seems to be missing…

    1. AOL/Time Warner looked like the Deal of the Century at one time too…

    2. The cost to Google? Drop in the bucket. But Broadcast.com cost Yahoo $5.7 billion…$4.1 billion gone poof, bubble economics at work…if anything even overvalued as it is, far far more rational than the height of the dot.com boomtownisms. So if this is Bubble 2.0, it’s more than double-off savings.

    3. Google will be a more tempting lawsuit target, but on the flipside, they are more able to fight back. Deals will be signed left and right, suits (if they even happen) will be stickers, but not tipping points. Not quite sure all will hang on that point. Cuban jumped the gun, imho. Better to make deals, than to sue.

    4. The only clear winner, of yet, be Sequoia…and maybe some trickle down select few YouTube employees. Basically boils down to Sequoia flipping off Kleiner Perkins.

    5. No real missed opportunity for Microsoft, cause they have proven time and time again, any content deal they royally screw up. Sidewalk, adCenter, MSN Originals/MSN Video, Slate, MSNBC, etc. Ozzie? Ozzie who?

    6. Real market, for someone to steal mindshare make a better Youtube, or at least become more of a real original content producer over just the randomness of YouTube. Even then, Hollywood and Burbank are still king, even more so, they just get another plank in the Google-one-stop-shop advertising outlet.

    7. YouTube was losing money left and right, they were shopping it around to anything that moved, Google’s Advertising empire only thing that bit. YouTube needed a lifeboat, Google gonna try and cash in, if not just another one of Google’s various offerings. Other media empires going it alone, crafting own, and getting a parta the YouTube action anyways, without all the headaches and bandwith bills.

    Really muchoadoo about nothing, cash rich Google gets talking points, and oceans upon oceans of press dribblehead ink and an outlet for it’s click-fraudy adverts. Whooopie do.

  23. Couplea points everyone seems to be missing…

    1. AOL/Time Warner looked like the Deal of the Century at one time too…

    2. The cost to Google? Drop in the bucket. But Broadcast.com cost Yahoo $5.7 billion…$4.1 billion gone poof, bubble economics at work…if anything even overvalued as it is, far far more rational than the height of the dot.com boomtownisms. So if this is Bubble 2.0, it’s more than double-off savings.

    3. Google will be a more tempting lawsuit target, but on the flipside, they are more able to fight back. Deals will be signed left and right, suits (if they even happen) will be stickers, but not tipping points. Not quite sure all will hang on that point. Cuban jumped the gun, imho. Better to make deals, than to sue.

    4. The only clear winner, of yet, be Sequoia…and maybe some trickle down select few YouTube employees. Basically boils down to Sequoia flipping off Kleiner Perkins.

    5. No real missed opportunity for Microsoft, cause they have proven time and time again, any content deal they royally screw up. Sidewalk, adCenter, MSN Originals/MSN Video, Slate, MSNBC, etc. Ozzie? Ozzie who?

    6. Real market, for someone to steal mindshare make a better Youtube, or at least become more of a real original content producer over just the randomness of YouTube. Even then, Hollywood and Burbank are still king, even more so, they just get another plank in the Google-one-stop-shop advertising outlet.

    7. YouTube was losing money left and right, they were shopping it around to anything that moved, Google’s Advertising empire only thing that bit. YouTube needed a lifeboat, Google gonna try and cash in, if not just another one of Google’s various offerings. Other media empires going it alone, crafting own, and getting a parta the YouTube action anyways, without all the headaches and bandwith bills.

    Really muchoadoo about nothing, cash rich Google gets talking points, and oceans upon oceans of press dribblehead ink and an outlet for it’s click-fraudy adverts. Whooopie do.

  24. I rather like GiggleTube…

    And I guess Ted Stevens was right after all, the internet is just a series of ‘Tubes’.

  25. I rather like GiggleTube…

    And I guess Ted Stevens was right after all, the internet is just a series of ‘Tubes’.

  26. First, congratulations to Google. Second, I personally do not think Microsoft missed any oppottunity here. If things are so obvious then the price would be even higher much higher for youtube. At the current price, Google made a very good deal. If Google had failed to buy this company today, I bet they might have been paying a similar price for a three year advertising contract with youtube.

    About the lawsuits, the only similar example I know was of Napster ages ago. Media companies did not understand the internet then and their initial reaction was to protect their business. Subsequently they realized and actually played the internet on the tunes of itunes. That is they made deals!

    The media companies have learned their lessons. They will play along instead of play against the internet. Expect some lawsuits but manageable not the business killing kinda like against Napster. Another thing media company learnt is that, it is not a good idea to create a dominant player in a media distribution, e.g., what they created in itunes. It took their negotiating power away. Jobs won’t buzz from 99 cents a song now. Since Google video and youtube are now going to have the same owner, it opens an opportunity for the thirdtube (yahoo, microsoft, sony, apple, myspace or even a startup). Now one can draw another significance of Schmidt joining Apple’s board. These media companies will cut deals with many companies with different business models and like anywhere else the fittests will flourish.

    Disclaimer: The commentator is Microsoft employee. The opinion is his own personal opinion.

  27. First, congratulations to Google. Second, I personally do not think Microsoft missed any oppottunity here. If things are so obvious then the price would be even higher much higher for youtube. At the current price, Google made a very good deal. If Google had failed to buy this company today, I bet they might have been paying a similar price for a three year advertising contract with youtube.

    About the lawsuits, the only similar example I know was of Napster ages ago. Media companies did not understand the internet then and their initial reaction was to protect their business. Subsequently they realized and actually played the internet on the tunes of itunes. That is they made deals!

    The media companies have learned their lessons. They will play along instead of play against the internet. Expect some lawsuits but manageable not the business killing kinda like against Napster. Another thing media company learnt is that, it is not a good idea to create a dominant player in a media distribution, e.g., what they created in itunes. It took their negotiating power away. Jobs won’t buzz from 99 cents a song now. Since Google video and youtube are now going to have the same owner, it opens an opportunity for the thirdtube (yahoo, microsoft, sony, apple, myspace or even a startup). Now one can draw another significance of Schmidt joining Apple’s board. These media companies will cut deals with many companies with different business models and like anywhere else the fittests will flourish.

    Disclaimer: The commentator is Microsoft employee. The opinion is his own personal opinion.

  28. If you can’t beat ‘em, eat ‘em. It’s funny that people applaud behaviour out of Google that they criticize out of Microsoft.

  29. [...] About the possible legal threats, Scoble hits the nail: Now, will Google get sued over and over? Probably. But if you think that matters then you are missing the point. Did Microsoft’s legal troubles slow down its cash generation machines? No. Neither will Google’s. Plus, Google has demonstrated it’s fairly adept at working out deals with folks who produce content, or own it. Yeah, they’ll probably lose a few battles in court, but that’s like losing a battle or two but winning the war. [...]

  30. If you can’t beat ‘em, eat ‘em. It’s funny that people applaud behaviour out of Google that they criticize out of Microsoft.

  31. Scoble, your opinion on this is amaturish as best. Unlike Cuban you have absolutely no position or expertise or insight on this business, so I’m not sure why the hell anyone would be asking your opinion. You’ve never held a position responsible for producing any product up unitl 3 months ago (and it’s debatable whether what you are producing is a product). Before that you were a very low level employee at MS, as far as I could tell, with NO responsiblity on product decisions. Before that you were, I dunno..an MS MVP, wherever the hell that means. And you worked in the tech press biz, and sold cameras. So, exactly were does your expertise in this area, compared with Cuban’s come from?

    How could Cuban possible be jealous? He, unlike you, understands the risks of YouTube. I gotta believe if Cuban thought there was money here, long term, he would have spent less time investing in HDNet and his movie business. Good god, man. At least apply some analytical brain cells to the question, rather then some hyperbolic bloviating.

  32. Scoble, your opinion on this is amaturish as best. Unlike Cuban you have absolutely no position or expertise or insight on this business, so I’m not sure why the hell anyone would be asking your opinion. You’ve never held a position responsible for producing any product up unitl 3 months ago (and it’s debatable whether what you are producing is a product). Before that you were a very low level employee at MS, as far as I could tell, with NO responsiblity on product decisions. Before that you were, I dunno..an MS MVP, wherever the hell that means. And you worked in the tech press biz, and sold cameras. So, exactly were does your expertise in this area, compared with Cuban’s come from?

    How could Cuban possible be jealous? He, unlike you, understands the risks of YouTube. I gotta believe if Cuban thought there was money here, long term, he would have spent less time investing in HDNet and his movie business. Good god, man. At least apply some analytical brain cells to the question, rather then some hyperbolic bloviating.

  33. @32. Chris, and now the people being infringed up from a copyright perspective have someone with deep pockets to go after.

  34. @32. Chris, and now the people being infringed up from a copyright perspective have someone with deep pockets to go after.

  35. What worries me is what’s going to happen to YouTube. This wouldn’t be the first time a company’s been bought just to be put on ice. I fully expect that YouTube will be killed off in the next ten months at the outside, because Google has a vested interest in retaining Google Video and control processes and deals are already in place. Easier and cheaper for them to force everyone to migrate all their videos over there than to keep two competing video units going.

    I’m groaning at the thought of the migration. I’m a lazy non-techie, and I vastly prefer the community-oriented aspects and ease of use of YouTube over Google video. I’ll miss it.

  36. What worries me is what’s going to happen to YouTube. This wouldn’t be the first time a company’s been bought just to be put on ice. I fully expect that YouTube will be killed off in the next ten months at the outside, because Google has a vested interest in retaining Google Video and control processes and deals are already in place. Easier and cheaper for them to force everyone to migrate all their videos over there than to keep two competing video units going.

    I’m groaning at the thought of the migration. I’m a lazy non-techie, and I vastly prefer the community-oriented aspects and ease of use of YouTube over Google video. I’ll miss it.

  37. >So, exactly were does your expertise in this area, compared with Cuban’s come from?

    Where does your expertise as a Scoble critic come from?

    By the way, if I was so low-level, why was my title “strategist?” at the end of my term at Microsoft? Why was I called into brief Gates about RSS and social software? Why was I helping plan CNET Builder.com Live conferences (and Visual Studio) conferences in the 1990s?

    But, you’re right. I am not an expert here like Mark Cuban is. He sold his company for billions to Yahoo. I haven’t done that yet.

    I am also uniquely qualified to talk about Google. I was one of the first speakers at Google’s Zeitgeist conference (Google’s best customers were in attendance there) and one of only two Microsoft employees who were there speaking. That’s not something that a “low level” employee does.

    But, glad to see you still are here being bored.

  38. >So, exactly were does your expertise in this area, compared with Cuban’s come from?

    Where does your expertise as a Scoble critic come from?

    By the way, if I was so low-level, why was my title “strategist?” at the end of my term at Microsoft? Why was I called into brief Gates about RSS and social software? Why was I helping plan CNET Builder.com Live conferences (and Visual Studio) conferences in the 1990s?

    But, you’re right. I am not an expert here like Mark Cuban is. He sold his company for billions to Yahoo. I haven’t done that yet.

    I am also uniquely qualified to talk about Google. I was one of the first speakers at Google’s Zeitgeist conference (Google’s best customers were in attendance there) and one of only two Microsoft employees who were there speaking. That’s not something that a “low level” employee does.

    But, glad to see you still are here being bored.

  39. @40. Re: Deep Pockets to go After…

    Yeah. But Google has deep lawyers too, and in things legal, it’s all about waiting it all out, and that costs money, tons of it. YouTube couldn’t see that thru, Google can in a heartbeat. Google already hooked a number of content deals on Google Video before the YouTube deal was even inked. iTunes recast the Napsterization model.

  40. @40. Re: Deep Pockets to go After…

    Yeah. But Google has deep lawyers too, and in things legal, it’s all about waiting it all out, and that costs money, tons of it. YouTube couldn’t see that thru, Google can in a heartbeat. Google already hooked a number of content deals on Google Video before the YouTube deal was even inked. iTunes recast the Napsterization model.

  41. Outcomes, maybe?

    Yahoo and Facebook is now a done deal…
    AOL – Out of the game…smallish me too deals, all crash and burn.
    Viacom – Sidelinded, small deals.
    News Corp. – Usual plodding along, MySpace more hype than revenue.
    Microsoft – Pay no attention. Dump Ballmer already.

    Really tho, boring tech deals, whole other world out there, Industrial & Commercial Bank of China to IPO hook $22 billion, PNC grabs Mercantile for $6 billion…Rusal, SUAL & Glencore three-way, GlaxoSmithKline grabs CNS…but no blogger ink yanked for that. Cross-eyed nose-level view techie thumb suckers…gawd. ;)

  42. Outcomes, maybe?

    Yahoo and Facebook is now a done deal…
    AOL – Out of the game…smallish me too deals, all crash and burn.
    Viacom – Sidelinded, small deals.
    News Corp. – Usual plodding along, MySpace more hype than revenue.
    Microsoft – Pay no attention. Dump Ballmer already.

    Really tho, boring tech deals, whole other world out there, Industrial & Commercial Bank of China to IPO hook $22 billion, PNC grabs Mercantile for $6 billion…Rusal, SUAL & Glencore three-way, GlaxoSmithKline grabs CNS…but no blogger ink yanked for that. Cross-eyed nose-level view techie thumb suckers…gawd. ;)

  43. And what about Adobe ? Are they picking some money by the way ?
    The fact is that Youtube is popular because it’s easy to use, cause the videos play in flash player.

    I’d really like to know how they deal software licenses with big sites like this.

  44. And what about Adobe ? Are they picking some money by the way ?
    The fact is that Youtube is popular because it’s easy to use, cause the videos play in flash player.

    I’d really like to know how they deal software licenses with big sites like this.

  45. GooTube: Google to Acquire YouTube?

    UPDATE (10/9/2006, 5.00pm EST):
    It’s official!!! Google To Acquire YouTube for $1.65 Billion in
    Stock. You can also
    read …

  46. Valuations on these dotcom businesses are getting scarey! You got myspace trying to get more money, Facebook only wants $1B+, and now YouTube. I feel the dotcom bubble beginning to grow, when will it burst, we don’t know.

  47. Valuations on these dotcom businesses are getting scarey! You got myspace trying to get more money, Facebook only wants $1B+, and now YouTube. I feel the dotcom bubble beginning to grow, when will it burst, we don’t know.

  48. I am surprised that Microsoft missed the boat on this one. Is it just me or does Microsoft seem to be playing catch up with an increasingly growing number of tech players? Okay, I know it’s not just me.

  49. I am surprised that Microsoft missed the boat on this one. Is it just me or does Microsoft seem to be playing catch up with an increasingly growing number of tech players? Okay, I know it’s not just me.

  50. [...] Reading with interest the flurry of posts about Google’s purchase of YouTube for around $1.6 billion, it seems the main worry right now is that since Google is a very rich company ($131 billion cap!), the lawsuits for copyright violations will start raining faster than you can say MPAA. Mark Cuban is particularly pessimistic about the business decision. [...]