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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.
Of course it costs Google money - exactly $1.65 billion.
Google is a public company now. Even if they've got approval to issue shares of stock, when they do they dilute earnings. Shareholders don't like this concept because it lowers the value of their stock. YouTube doesn't make any money - so you have the same earnings divided by more shares of stock.
I see the same excitement that happened during the Dot Com bust. Even if you somehow believe Google can print money, remember, the real question is this:
Did they spend $1.65 billion wisely? I don't think so. YouTube's got a lot of highly questionable video both from a legal and ethical standpoint. If you're looking for page views, why not just buy one of those popular Adult matchmaking type websites.
Then yesterday GOOG was up to as high as $432 a share. I bet it goes up another $10+ today. How much value did that add to Goog?
Insofar as it's hard to see how profits (and therefore dividends) are going to be significantly raised by this acquisition, it's also hard to see how this has added value to the company. Indeed, if this were to go bad, it would damage confidence and could damage the share price.
The bottom line is if Google stock goes up $10 in one day, and their marketcap increases 4 Billion dollars, that is MONEY. Whether it stays that way in the future is another question...
Also, there's NO dilution of the stock, since YouTube was purchased with cash.
If copyrighted, they better have a plan to keep that content on the site and keep it for free. An option might be to purchase content from the sources, and then place video ads in themselves through AdWords. Or, selling content like iTunes? I think the free model with advertising and removing any fast forward features would be the best option for revenue, however you are doing so by potentially hindering the user-experience.
If non-copyrighted, material, which to me is non-existent, then they better have a way to add video ads right into the front end of the videos and throughout soon. Maybe they will even offer content suppliers the ability to split the revenue like AdSense, but based on views. Video AdSense.
In my eyes, usage of AdSense will not pan out in most instances, but in special instances I could see it possibly working out.
Not to mention that the amount of law-suits should increase since the owners of the site now have deep pockets.
Bottom line... they need to entice people to continually add new content while maintaining or increasing user views.
it's cash ONLY if they sell stock that day, while it's up. And, if you have Amazon stock from late 1990's, it isn't worth $400 a share anymore.
>> Also, there's NO dilution of the stock, since YouTube was purchased with cash.
"First, the copyrighted material must "reside" on the hosting service. Second, the material must be stored "at the direction of a user." Third, the hosting service must not be "aware of facts or circumstances from which infringing activity is apparent."
Fourth, the hosting service must not "receive a financial benefit directly attributable to the infringing activity."
Goog's strategy IMO: "make money with us, not sue us" deals with the large copyright holders; scare the small ones with years of expensive litigation.
Whether or not you think the content of these people is actually worth anything doesn't matter. The fact is that if people are used to getting paid any time their material is played, they see this deal with Google as a HUGE pay day.
It is time to bring on board the opinion makers, opinion drivers, adgenda setters, and not the reactionaries . I look for Google to do more deals with the old gaurd media (nbc, cbs, times, journal...etc). It will appear to be about licensing content, but really it will be about firming up support, creating relationships, and buying/generating loyalty.
One need not be the smartest person to succeed. There is a lot more to it.
Whether they are special or not, it doesn't matter much; they got the world's (and financial advisors') attention. With money now they can now hire a lot of "special" people.
It just looks like a couple of young lads who were in the right place at the right time.
I prefer karma as Earl would say.
I believe they are separate from a lot of us here on the board by the fact that their ideas generally are centered on the betterment of the web community, not to make a buck. They have been leaking tons of bandwidth since they opened.
Too many of my ideas are certainly centered on how I can make the idea profitable first, instead of maybe secondary or later. I could be wrong, maybe it is just me, alone, that needs the new direction.
There's already quite a bit of that going on on YouTube. Only nobody gets to tap a revenue stream from it.
That is, manufacturers make videos demostrating their products, put them up on YouTube for free, then link to them from their websites, blogs, etc.
Google is going to figure out a way to charge people for this. Which, of course, will remove a lot of the attractivness from it.
I agree with the comments about developing web sites to meet a need, not to make a buck. It just isn't done that much any more. Glad to see some bucks flowing to somebody who built a website just because it seemed to be a good idea. (And was.)
Often, by concentrating too much too early on how to make a buck, that puts a roadblock in front of where the site can go - constrains it. It may be that the best way to monetize it may not be what the developer originally thought. Better to build the site, get the audience, and then worry about how to make it make money.
In this case, the developers apparently subscribe to the "bigger fool theory". They sold to a bigger fool.
Now, I hope Google doesn't screw it up.
If I had material on YouTube, I'd want to extract all I could from Google anytime they played it - that's just good business sense. If they're going to make money off it, then I want my share - all of it.
And Google's going to have a real hard time trying to say this stuff is worthless, after all they just paid $1.65 billion for it so it must be worth at least that much.
The real interesting part is that the media companies are getting in on it as a rev share. That could be huge for online media.
Well it was cheaper than Yahoo!'s aquisition of Mark Cuban's Broadcast.com and look at what that got them.
Type "www.broadcast.com" into your browser.
Whoopee! A 5.7 Billion dollar domain name!
Like everyting else, there will be a scramble to copy Youtube, then a few months from now everyone will say "you what"? Just like pixel ads.
In a year you'll type in youtube.com and get the Goggle.com home page.
I'd be liquidating that all stock deal ASAP and buying an island somewhere warm.
They bought the system, the licensing and the format. After that - it was 100% up to Yahoo to do something with it. I still think Broadcast.com is a doable buisness model that could make billions if managed right. (that is not to say that Yahoo, doesn't have some good audio
stuff in the works because of it).
It also got it off the table so Microsoft - which was in a death lock fight with Real Player - couldn't have it.
> type in
You can say the same thing about Goto.com, Overture.com, Altavista.com, and AlltheWeb.com.
Both of which make Yahoo a ton of money and position it ahead of the pack.
With the amount G's stock shot up with the news of the purchase, they may have already paid for it.
A good deal for G.
Maybe this explains why Google built HUGE datacenter farms lately to supply all those video feeds?
Also its not so surprising considering the guys who funded YouTube were the same ones who funded Google. When Google went IPO they demanded the ex-CEO of Novell to come in and take over. That was a good move, I wouldn't be surprised if they told Google to buy YouTube.
Hmmm, interesting circle:
Youtube who was funded by the same VCs (Sequoia capital) who funded Google.
Technically, they just traded billions of dollars worth of Google's investor stock into their private stock? The guys who will win out of this deal are Youtube owners ( which happens to be Sequoia capital, the same ones that funded Google )!
If they had sold 1.5B worth of these shares on the open market in Google, the company stock would of sank, but instead they annouce a buy-out of the same company they funded and GOOGLE stock goes up?
... Years later, tons of lawsuits later, Youtube closes, but does it matter? because at the end of the day 1.5B worth of investor money is in the hands of a few board of directors.
1. Sequoia capital is NOT the only owner.
2. Why would I care how much they made if they helped me build, and then sell my 2 year old business at $1.65 Billion? Would you rather have 10% of $1.65 Billion or 100% of a $10 Million, if that, company? Youtube would not have made it without venture capital.
So, the only ones who know much how money they were making, are YouTube and gues who? Google.
My bet is Google know that somehow Youtube was/is a money bomb with adsense and having potential for other ad systems or strategies, they bought it.
I wonder if we would see this happening in the future... Having Google acces to know which sites are producing more money, maybe start buying other companies just like they did right now.
Google know that somehow Youtube was/is a money bomb with adsense
nah, i estimate 100,000$/month adsense income for youtube at the present time. actually, their site is totally unsuitable for this advertising type. worst case audience (kiddies looking for fun), lousy ctr, bad ad targeting and quality.
one thing is for sure, adsense in the current form is not the right way to monetize the site and regain the expenses. google has to come up with new marketing approaches for that.