Google Buys YouTube

If you haven't heard yet, Google announced yesterday that it has agreed to acquire YouTube for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will continue to operate independently to preserve its successful brand and passionate community.

The acquisition combines one of the largest and fastest growing online video entertainment communities with Google's expertise in organizing information and creating new models for advertising on the Internet. The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience.

"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," said Eric Schmidt, Chief Executive Officer of Google. "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."

"Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners," said Chad Hurley, CEO and Co-Founder of YouTube. "I'm confident that with this partnership we'll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide."

When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google's own fast-growing video business. YouTube will continue to be based in San Bruno, CA, and all YouTube employees will remain with the company. With Google's technology, advertiser relationships and global reach, YouTube will continue to build on its success as one of the world's most popular services for video entertainment.

The number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition. Both companies have approved the transaction, which is subject to customary closing conditions and is expected to close in the fourth quarter of 2006.

Posted on Oct 10, 2006	Reviews \| Share \| Digg
Filed in: Mergers and Acquisitions

Gilbert
Tuesday, 10 October 2006 17:57

Pre-rolls and access to eyeballs is a major traction point is of course the end game in this acquisition. I have read comments that suggest ad dollars might flow on-line and not on traditional outlets. I do not think this will happen; sure, there will be a shift over time in percentage terms however, ad dollars will flow to OTA and cable for some time to come.

Where cable could be marginalized, call it a cable by-pass would be where content is not offered a la carte. The power of IPTV is the ability to slice, dice, and offer a menu option for consumers. Increasingly as mobile widens over the national footprint, broadband penetrates that platform as if it did with fixed devices and the user experience improves people will want their content wherever they are and when they want it, this is the challenge for traditional broadcasters.

There is another point worth noting and that is the building of community. The underlying draw for video sites like YouTube and Jumpcut is the ability to share and in the case of Jumpcut, edit user content and mashup “public domain” content from other members. If companies can create these user nodes, or circles of users that want to share content across platforms then advertisers will have reach into a highly targeted niche market to sell to – this would be powerful marketing success.

Curtis
Friday, 13 October 2006 14:52

Completey agree with your last point. There was an article elsewhere that was well-written and went on to explain why Microsoft doesn't understand the "community" aspect of these sites by not going harder after YouTube. Microsoft continues to believe that they can reproduce the product with better technology and draw users away, from search and online advertising to iPods and now video. They've got a long ways to go.

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