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

[Libaax-Sankataabte]

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

 

By Jonathan Thaw

 

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.

 

Big Bite

 

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.

 

Advertisers and media companies are piling into sites like YouTube and MySpace.com to reach more users. YouTube viewers on average spend 26 minutes on the site each month, according to Nielsen. YouTube already uses ads sold by Google.

 

New Agreements

 

Before today's announcement, Google and YouTube separately struck agreements with three of the world's largest record companies to add music videos on their Web sites.

 

Universal Music Group, the largest music company, and Sony BMG Music Entertainment, the second-largest, agreed to let people watch their videos on YouTube. Google made deals with Sony Corp. and Warner Music Group Corp., the fourth-largest, to share advertising revenue in exchange for free streaming of videos on its Web site.

 

In addition, CBS Corp. agreed today to distribute video content on YouTube. NBC television already promotes programs such as ``The Office'' on YouTube, and Warner Music last month became the first record company to let YouTube users download copyrighted music and videos. In return, Warner Music gets a portion of advertising revenue.

 

Before the purchase, Google ranked seventh in online video traffic, according to ComScore Networks Inc. in Reston, Virginia. Video is emerging as an Internet service comparable to e-mail and Web search, Anthony Noto, a Goldman, Sachs & Co. analyst, said today in a note to investors.

 

Google Video

 

Google began accepting user-generated content for its video search engine last year. Yahoo, the most-visited U.S. Internet site, started in May. Redmond, Washington-based Microsoft, the world's largest software maker, began testing its service last month.

 

The acquisition also illustrates how established Internet and media companies are snapping up start-ups.

 

Last month, Yahoo purchased Jumpcut to add video sharing and editing services. Sony, producer of the ``Spider-Man'' films, bought video-sharing site Grouper Networks Inc. for $65 million in August. News Corp., controlled by Rupert Murdoch, bought the parent of MySpace.com a year ago for $580 million.

 

The sale is a windfall for Sequoia Capital, which has invested $11.5 million in YouTube since November, according to YouTube's Web site. Menlo Park, California-based Sequoia also invested in Google and Yahoo, owner of the second-most-used search engine.

 

YouTube was founded by Hurley, Steve and Jawed Karim in February 2005. Hurley, 29, chief executive officer, is a fine art graduate from Indiana University of Pennsylvania. Chen, 28, chief technology officer, studied computer science at the University of Illinois. Both men worked at PayPal, where Hurley designed the company logo. Karim left YouTube to study at Stanford University, the Web site said.

 

`Evolution of Dance'

 

Technology that allows people to easily upload and share videos has spurred YouTube's popularity. The most-viewed clip at the site is ``Evolution of Dance,'' a 6-minute film of a dancing man that has been seen more than 33 million times.

 

More than 65,000 videos are uploaded to the site every day.

 

``With YouTube's traffic and buzz, Google could quickly try to build its position as the video advertising clearinghouse online,'' UBS AG analyst Ben Schachter wrote today in a note. ``It's just the kind of bet we'd expect from Google.''

[SeeKer]

Originally posted by Libaax-Sankataabte:

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.

And they say you can't make money in the stock market.

[Legend of Zu]

Imagine how 'Shiid' they [the YouTube owners] were couple of years ago.

 

Why didn't I think of something like this? what a useless brain I have got!

 

Assume they were Somalis; what do you think would have been the impact on the somali community? we would have seen everyone doing IT, perhaps, aren't they doing that already?

 

They would have been mentioned in every qabiil's circles! I wonder what would the other qabiil have done? May be inay Caayaan!

 

Could it be every qabiil calling for an emergency meeting with the title " Reer hebel way naga hormareen, Haddaanu ba'nay!"

 

May be we would have seen alot of topics about them in the political section of SOL! :eek:

 

Well...That is my somaliness speaking!!!

 

Salaamaat

[ElPunto]

^You're just another lazy African Zu - don't you know? - all that we're good for is dancing and prancing:D

[me]

Originally posted by ThePoint:

^You're just another lazy African Zu - don't you know? - all that we're good for is dancing and prancing:D

We are Somalis we can't even dance. Somali dancing is at the same level as that of the Germans. Soomaalidu ma ciyaarto, wey gaardisaa.

 

Originally posted by Legend of Zu:

Imagine how

'Shiid'

they [the YouTube owners] were couple of years ago.

 

Why didn't I think of something like this? what a useless brain I have got!

 

Assume they were Somalis; what do you think would have been the impact on the somali community?

we would have seen everyone doing IT, perhaps, aren't they doing that already?

 

They would have been mentioned in every qabiil's circles! I wonder what would the other qabiil have done? May be inay Caayaan!

 

Could it be every qabiil calling for an emergency meeting with the title

" Reer hebel way naga hormareen, Haddaanu ba'nay!"

 

May be we would have seen alot of topics about them in the political section of SOL! :eek:

 

Well...That is my somaliness speaking!!!

 

Salaamaat

hahahahaha yeps. I think the owners would become warlords wit money like that. I play the lotto and the day I win, I will become a warlord.

[Allamagan]

Originally posted by Legend of Zu:

Imagine how

'Shiid'

they [the YouTube owners] were couple of years ago.

 

Why didn't I think of something like this? what a useless brain I have got!

 

loooooool @ useless brain! I believe if you let's say you were to come up with this "you tube" idea and you are a somali or any non-white I believe no one would ever give you the chance to be listened.

 

I may be wrong, but thats how i see in today's world.

[Legend of Zu]

^^^ LooooL..Crazy lots... The owners of YouTube are diverse my friend; they are a chinese, white and bangaladeshi/german muslim dude. So there is goes yuor theory of white vs non white success.

 

As for those computer wiz's out there {SOL Forum} I got some briliant Ideas [counter argument for my useless brain comment] which will make millions for us, whaddadosay geeks?...

 

Just think about it... Once we make it and we are being interviewed we would say "oh we met on a forum where the topic was about YouTube!!"

 

Salaamaat

[Jacaylbaro]

So, u saying Youtube is now gone to Google ,,, wow ,,, that is really exiting ,,,,, viva la google ,,,,,,,,,,,

 

i think next time they gonna buy the Microsoft ,,

[RedSea]

well I think I saw that one coming, Google once agian getting big, what will their next move be,needless to say, they are on their way to being the dominant web based network even more so now.