Google buys YouTube
SAN FRANCISCO: Web search leader Google Inc has agreed to buy top video entertainment site YouTube Inc for US$1.65bil in stock, the highest price yet paid for a consumer-generated media site.
The first deal to value one of the new generation of user-participation websites at more than US$1bil combines two of the most popular Internet brands: Google, synonymous with Web search and rapid innovation, and YouTube, a Silicon Valley upstart that has spearheaded the video-sharing craze.
YouTube, which grew in 19 months from a start-up in a garage to now serve up 100 million videos daily, has drawn scrutiny from major media companies for copyrighted television and music videos that users post without owner consent.
While YouTube said on Monday it had signed a spate of distribution agreements with major record labels, some analysts caution thath Google could still be inviting lawsuits with this acquisition.
A file picture shows Chad Hurley (left) and Steve Chen posing for photo at their office loft in San Mateo, California. --APpic
“YouTube is phenomenally valuable in terms of traffic and in the Internet sector this is important just like location is important in real estate,” Oppenheimer analyst Sasa Zorovic said of combining YouTube with Google's advertising machinery.
Analysts said the deal would thrust Google quickly into the emerging market for video advertising, where it had only a tiny foothold compared with Yahoo Inc and start-ups.
The all-stock deal, expected to close this quarter, was structured to make it tax-free for YouTube shareholders and cheaper for Google than paying cash, company officials said.
The move was a big departure for Google, Citigroup analyst Mark Mahaney noted, with the purchase price almost equal to the total value of what the company had spent on prior mergers. But the value of combining one of the world's largest user-generated sites with one of the world's largest advertising and computer networks “could be enormous”, Mahaney said.
YouTube's 29-year-old chief executive Chad Hurley told
Reuters in an interview that what had sold him and co-founder Steve Chen, 27, on Google was their belief that its resources and engineering talent could help them realise their goal of delivering the most entertaining online video experience.
“Now we have the resources behind us at Google to help achieve our vision,” Hurley said, declining to say how much Google stock he and his partner would receive.
YouTube attracted 72 million visitors worldwide in August, according to Web audience measurement firm comScore Networks, up from 27 million users in April and 2.8 million a year ago. – Reuters