Monday, October 09, 2006

Google said to buy YouTube for $1.6B

Google (GOOG) is up $10.00 this morning on the rumors that it would announce today a deal to buy the online video service YouTube for $1.6B.

It seems that YouTube burning rate for their bandwidth bill was very high and they could not sustain it anymore since they still don't have a revenue model.

YouTube assets are in the million more subsribers and the 100 million videos download per day and for Google that's a lot of opportunity for ads placement.

In my opinion the problem with YouTube is that it is a copyright infringment machine since they do not control or filter what their subscribers upload. Companies like Universal and Sony are asking for hundreds of million of dollars in license fees due to uploaded movies or copyrighted songs used as soundtrack for amateur videos. I am sure Google has a plan to solve this since they already developed technology for GoogleVideos to indentify and filter out suspected copyright materials for further human inspection, or else this could turn into another Napster.

Anyway, kudos to the founders of YouTube for turning a very simple idea to a $1.3B in less than 19 months. These 3 former PayPal employees, one of them Karim Jawed who I had the chance to meet personally, a young native german speaker with arab origins, happened to be in the right time, in the right place with the right connections. They were funded by Sequoia Capital, a famous VC in the valley that also funded our first startup and have Google, Oracle,Apple,Yahoo and Cisco in their portfolio!!

I hope that this would go through and then we can say "Congratulations" to these entrepreneurs.


el greco said...

qui arrêtera Google?

Napo said...

it's more about the right place that anything else. the valey, boston and raleigh, nc..are hubs for VC and sequoia is indeed a very succesful VC company.

samsoum said...

The YouTube stroy is amazing in the sense that it is not rocket science technology, just allow people to upload video, run it through flash!!
The site was done in 2 months in a garage, they recieved one round 0f $3.5M and later when they became successfull, they got a second round of $8M!!
Now, I don't think anynone had predicted the success, even the founders themseleves. Sometimes it is a combination of a simple idea solving a big pain point executed correctly while spending a minium amount of $ and of course a LOT of luck.

ancien combattant said...

en attendant Google devra faire face aux majors pour les droits des vidéos déjà présentes sur YouTube :

samsoum said...

@AC: You're right, I mentionned that in my post, but just a few minutes ago YouTube, Universal Music Group and Sony BMG just announced that they signed a distribution deal. An agreeement with Warner Music Group was signed last month.
I am sure these deals were put by Google as a contingency to the acquisition, that's why YouTube signed them right away.