Google buys youtube for $1.65 billion

[Kori Ellis]

:wow

http://www.businessweek.com/ap/financialnews/D8KLEQN80.htm

Google snaps up YouTube for $1.65B

The Associated Press
By MICHAEL LIEDTKE
AP Business Writer

OCT. 9 8:46 P.M. ET Internet search leader Google is snapping up YouTube for $1.65 billion, brushing aside copyright concerns to seize 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 a few hours after YouTube unveiled three separate agreements with media companies to counter the threat of copyright-infringement lawsuits.

The price makes YouTube Inc., a still-unprofitable startup, by far the most expensive purchase made by Google during its eight-year history. Last year, Google spent $130.5 million buying a total of 15 small companies.


Google Sets Aside Copyright Concerns In YouTube Acquisition

http://www.informationweek.com/management/showArticle.jhtml?articleID=193105728

Google's $1.65 billion YouTube acquisition would make it the owner of a company that observers predict is about to be hammered by a barrage of copyright-infringement lawsuits.

By Thomas Claburn
InformationWeek

Oct 9, 2006 07:06 PM

Despite predictions that would die a slow death at the hands copyright litigants, Google Monday said that it plans to acquire social video site YouTube for $1.65 billion in stock. And both companies today announced other alliances involving traditional entertainment giants.

"The YouTube team has built an exciting and powerful media platform that complements Google's mission to organize the world's information and make it universally accessible and useful," Eric Schmidt, CEO of Google, said in a statement. "Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers."

The YouTube deal comes on the same day that Google and YouTube disclosed a series of content deals. On Monday, CBS Corporation and YouTube struck a strategic content and advertising partnership to put short segments owned by CBS on YouTube in exchange for a share of online advertising revenue.

Google, meanwhile, said had reached a deal to make Sony BMG Music Entertainment videos available on Google Video and shortly through third-party sites. It also arrived at an agreement with Warner Music Group to offer that company's content on Google Video both supported by ads or for purchase.

In the days leading up to today's announcement, blogger and entrepreneur Mark Cuban wrote in an online post that Google would be crazy to buy YouTube because of the potential liability to copyrights claims—much of YouTube's popularity is attributed to unauthorized copyrighted content and the company's business model has been likened to the ill-fated music downloading service Napster.

Similarly, Forrester analyst Josh Bernoff predicted YouTube is "goin' down."

But in a conference call for investors following Google's announcement of the acquistion, Chad Hurley, CEO and co-founder of YouTube, dismissed such doomsaying. "From the beginning, we've always respected rights holders rights," he said. "And we're going to continue with that mission."

Google SVP David Drummond echoed those sentiments, indicating that technical solutions to deter copyright violations were under development, including new audio fingerprinting and metadata search technology.

YouTube co-founder and CTO Steve Chen confirmed that his company expected to have new content identification technology active in about a month.

If the deals with CBS, Sony, and Warner are any indication, the major entertainment companies appear to be satisfied that Google and YouTube are more interested in working with them than against them as far as copyright issues are concerned.

But Cuban argues that copyright law isn't on YouTube's side. "They [YouTube] are trying to push the obligation of licensing rights out on the rights holders by hiding behind the Safe Harbor rules of the DMCA," he wrote on his blog.

Like Google, YouTube insists that copyright holders who don't want their content posted online opt-out by sending in a formal notification to remove unauthorized content. Publishers traditionally took the opposite tack: They would opt-in by first securing permission from copyright holders before making use of their content.

[Johnny_Blaze_47]

Cuban had two good blogs about this today - especially since "The Smartest Guys In The Room" apparently was on the Google Video site as of this morning.

http://www.blogmaverick.com

[Johnny_Blaze_47]

Nevermind, just read Cuban's quotes....

[1Parker1]

Smart move by Google. Youtube is becoming crazy popular...

[Kori Ellis]

I agree with Cuban in that I think google will get sued a lot now over the copyright issues.

[ObiwanGinobili]

how I wish my name was Chad hurley...

[MannyIsGod]

I was going to buy them, but I decided I had better uses for my 2 billion dollars.

[GINNNNNNNNNNNNOBILI]

I was going to buy them, but I decided I had better uses for my 2 billion dollars.

Yea, like use it for administering bad beats online

[MaNuMaNiAc]

How long has youtube.com been up? 1? 2 years? UNBELIEBABLE! its creators hit the jackpot!

[boutons_]

October 10, 2006

Venture Firm Shares a YouTube Jackpot

By MIGUEL HELFT and MATT RICHTEL

SAN FRANCISCO, Oct. 9 — Even in Silicon Valley, it is rare for so much money to be made so fast — and by so few.

The biggest winners in the $1.65 billion acquisition of YouTube by Google are YouTube’s founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19-month-old start-up into Google shares that are probably worth tens of millions. YouTube’s roughly 60 employees are no doubt celebrating as well.

But only one venture capital firm — Sequoia Capital — got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004.

Sequoia, which is among the most successful venture firms in Silicon Valley, invested a total of $11.5 million in YouTube from November 2005 to April 2006. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.

That kind of payday, especially for an investment that is less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple, Cisco, Oracle, Yahoo and Google itself.

Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.

“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.

Sequoia did not return calls seeking comment.

The connection between Sequoia and YouTube can be traced back to Mr. Chen’s and Mr. Hurley’s days at PayPal. After PayPal was bought by eBay, the two men were looking for a new company to start. They hit upon the idea of a site that would help users exchange video files.

In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Mr. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November 2005, he agreed to invest $3.5 million in YouTube. Five months later, Sequoia put an additional $8 million into the site.

“It wouldn’t be surprising if they owned 30 percent,” said Michael Kwatinetz, a founding general partner at Azure Capital Partners.

The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insights into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Mr. Kedrosky said.

The deal by firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Mr. Kedrosky said.

“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner Perkins.”

Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms — and Sequoia ranks among the most successful — hits on the scale of YouTube more than make up for the misses.

A venture firm makes money only when the start-ups it has financed are sold or go public. It then splits profits among its investors after taking a share, which can be 20 to 25 percent.

The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric E. Schmidt, Google’s chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”

A Google spokesman said Mr. Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals still has other venture capitalists and entrepreneurs salivating.

“It’s good to hope,” said Peter Clemente, chief marketing officer of ManiaTV, a Denver company that produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.

Mike Hirshland, a partner at Polaris Venture Partners in Boston, said, “This is obviously the talk of the sector.” Polaris has invested $11 million in Heavy.com, an Internet video site founded in 1999 that aims at men ages 18 to 34. Mr. Hirshland called the deal the “first major venture-level return for an online video company, a sector that’s probably the most-watched and commented-on sector around the Internet.” He added: “It’s certainly the most hyped.”

The possibility of hype is leading some to worry about a bubble.

“It certainly starts to heat up the space a little bit,” said Mr. Kwatinetz, warning that Internet video might follow the same trajectory as, say, reality television, which was ignited by the success of “Survivor,” a show that was followed by a long list of imitators.

Indeed, the success of YouTube, as well as MySpace, the No. 2 video site on the Internet, has spawned a generation of competitors focused on the creation and sharing of videos, said Josh Felser, president of Grouper, a video sharing site purchased this year by Sony Pictures Entertainment for $65 million.

“There are hundreds,” Mr. Felser said. Some companies have already risen above the fray. In March, Enterprise Partners Venture Capital announced it had invested an undisclosed sum in vMix, a site that lets people upload videos and slide shows.

In April, Veoh Networks, which lets people share and watch videos, received $12.5 million from Spark Capital, Time Warner, and the Tornante Company, which is controlled by the former Disney chairman Michael D. Eisner.

Also in April, Revver, a video sharing site, received $8.7 million from the venture capitalists Draper Fisher Jurvetson and Bessemer Venture Partners, among others. The company has since received more funding from Comcast Interactive Capital and Turner New Media Investments.

Joe Lazlo, a senior analyst with Jupiter Research, said the companies that are attracting funding are ones that are finding ways to differentiate themselves. He said one creative concept was that of Break.com, which allows people to post videos, then buys the more popular ones and runs ads with them.

But so far at least, Break.com is not biting at venture capital offers. Keith Richman, its chief executive, said the company had declined financing a number of times as it tried to build the business on its own.

Mr. Felser, the president of Grouper, said there was a limit to how much a video creation and sharing company can hope to grow independently, because of the expense of bandwidth and advertising infrastructure.

Katie Hafner contributed reporting.

http://www.nytimes.com/2006/10/10/technology/10payday.html?ei=5094&en=1962d8bf24e9391c&hp=&ex=1160539200&partner=homepage&pagewanted=print

[InRareForm]

2016....... researchers say YouTube is worth between $26 billion and $40 billion

[Avante]

I grew up in California. And while I knew about the pro rasslers in places other than California because of the magazines. I'd never seen any of those greats actually rassle. They were in Texas, midwest, east coast, other places.


Thanks to youtube I've not only seen all those legends I've seen some of the greatest matchs in that biz history.

Then theres....

In 1966 San Jose States Tommie Smith ran a 19.5 200m on a straight, that was considered the greatest track performance ever. But it was never televised and I'd never seen it, until, yep, youtube.

I own 12 big books on them blues, and own over 6000 CD's, I have them blues totally covered, nope, I didn't. I just thought I did, who in the hell is Smokey Harrison? Yep, discovered him on youtube, as I did Texan Bo Jones.

If not for youtube, I still wouldn't have seen that 19.5, Lou Thesz vs Verne Gagne or heard Smokey Harrison and Bo Jones.