GOOG Buys YouTube

"yesterday GOOG was up to as high as $432 a share"

Sounds like the old "pump and dump" to me ;)

>>This didn't cost Google ANY money. None. Zero. Zip. Nada.

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.

Shareholders don't like this concept because it lowers the value of their stock.

It's actually increased it.

I think that's probably the point being made above - the rise in stock price from the news has covered the cost of the purchase, with a small profit.

TJ

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?

NOTHING - This is a classic mistake : when it comes to publicly traded shares, etc. price and value are not the same thing at all. You might say that the price is the market's current guess as to the value - maybe - but that's about all. Actual value is determined by recent and predicted future dividends (and certain other factors such as risk and bank interest rates).

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.

Kaled.

I think you guys are splitting hairs here.

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.

I think the most important thing that Google should have looked at, and I am assuming they are smart enough to have done so, is not the number of page views, but what the users of YouTube are watching. Are the majority of people spending the time watching copyrighted material or non copyrighted material?

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.

>> 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...

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.

Huh?

Don't forget that, for Google, there's more at stake than just "How quickly will we earn back our investment with advertising revenues?" (If Yahoo or Microsoft had acquired YouTube, the pundits would be saying that Google had been headed off at the pass, Larry and Sergey were like aging rock stars from the Web 1.0 era, yadda yadda yadda....)

Ooops... my bad.. I thought it was all cash

Interesting;
"YouTube may add to Google's copyright worries"
[news.com.com...]
"...But YouTube's--and therefore Google's--potential legal liability depends on how the courts interpret an area of copyright law that remains surprisingly unsettled..."

"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.

When listening to Howard Stern they were talking about this deal. Both Howards Stern and Artie on the show said their material is being shown on there without permission. Then they both said they would be "dropping a note" to Google about it to see about getting a chunk of the money Google has.

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.

Google's biggest challenge is educating or converting to their way of thinking the masses about copyright. They have one stiff black eye (it will heal) over the book scanning issue. That was an old fashioned first hand education about never underestimating the back draft over an issue. That education is all about getting out in front of an issue. I think that is the reasoning behind the video deals yesterday ahead of the YouTube announcement. The challenge is a pr one now. They can save truck loads of money and time by getting the pr team out in front of it all.

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.

There is a video on YouTube from Chad and Steve, both looking very happy with themselves, to me they do not look anything special and do not seem to have much of an insight.

It just looks like a couple of young lads who were in the right place at the right time.

>> to me they do not look anything special and do not seem to have much of an insight.

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 was mentioned just above here but I think it's right, that AdWords will now have AdVideo or something to that effect. Google has seen that anyone can make a video that people will watch, so obviously advertisers can make a video that users will be forced to watch. Even if it is only 5 to 7 seconds. People will still watch it if it is short enough. And Google can charge premium CPM prices for it, probably the same if not higher than AdWords clicks. Would help with the whole "fraud" issue too since they could randomize the ads but still keep them highly relevant to the videos being shown.

Finally an affiliate program that can center around the value of branding so we can really stick it to those big guys like Coke and McDonalds. I for one am really happy we are going to be able to reverse the "accountability in marketing" trend. Can you imagine how many embedded videos would hit the boards and myspace if there was a VidSense. Muuuhhhaaaahhhaaahhaaa

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.

Sequoia was one of the founders of Google is on its board and owns 30% of YouTube. So all this amounts to is probably a shift of money from the left hand to the right hand.
A lot of noise signifying nothing - especially when you consider that it is a stock swap.
The two lucky founders ended up making a lot of money though.

I think a major use will be to use YouTube to HOST video ads.

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.

>>Google's biggest challenge is educating or converting to their way of thinking the masses about copyright.

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.

Looks like Google paid approximately 1% of their stock for 1% of their revenue. Given that YouTube revs are expected to double to $100M in one year that's not a bad deal since Google's revs are only expected to grow 30% in one year.

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.

WoW! Good for people to ues.

Was 1.65 Billion too much?

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.

> and look at what that got them.

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.

The roots and core of broadcast.com are alive and well here:
[launch.yahoo.com...]
[audio.search.yahoo.com...]

Both of which make Yahoo a ton of money and position it ahead of the pack.

Does anyone know if the 3rd found of YouTube, the one that left the company last year to return to school, still had any ownership? If not, I'm betting he is hearing it from everyone right now.

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 is not about bringing better content, but rather MORE money in the pockets of the board of directors before web 2.0 explodes? ;)

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?

What?

... 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.

>> 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 )!

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.

Obviously they have info we don't (that made them take the decision of buying youtube). Youtube started putting ADSENSE on their pages and I think thats the key.

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.

An excellent move by Google - will follow the developments with great interest.

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.