Now don't get me wrong, I like YouTube. Being able to show my girlfriend the end of Rocky in order for her understand why I yell "ADRIAN!!!" around my apartment is a nice gift to society. And I applaud YouTube for turning online video, usually portrayed as "Codec Slickers 2: The search for XVID," into a simple thing that even my Mom can get behind.
But what I don't get is why YouTube is worth $1.65 billion dollars? Towards the end of yesterday, Matt piped up when he saw the headline and said, "Wow, that's like buying 3 small countries." He was far off -- more like 7. Or to put it another way, YouTube is worth more to Goggle than all of the Virgin Islands -- population 108,605.
But why? Everyone says that it will be a "lucrative marketing hub," but it has yet to monetize much of its 100 million videos served per day. It's trying, don't get me wrong, but they spend nearly $1 million dollars per month on bandwidth bills alone. It's going to be a long, hard, uphill battle to make some cash for YouTube. Content partnerships with studios and record labels will help, but let's not forget that YouTube is already hosting a lot of copyrighted content -- which makes them a lawsuit magnet.
So, am I crazy? Is YouTube really worth $1.65 billion? Will it last long enough to find out?
By: Jeff Pollard
Google Buys YouTube. ¿Qué?
Online Advertising
The author's views are entirely his or her own (excluding the unlikely event of hypnosis) and may not always reflect the views of Moz.
Sometimes we begin to think that everything we touch will turn to gold. Perhaps there are bigger pictures that haven't been revealed yet, but it also reminds me of articles, threads, and blogs that have pointed out how for all the "successes" Google brings to mind, many of the undertakings have been rather lackluster. Of course, lots of text best offerings, even with tons of traffic, don't pull the bandwidth of media. It may be a drop in the bucket, but those drops can add up quickly.
Get the feeling that were destined to repeat the lessons unlearned? Starting to seem like the bubble is getting a little overinflated again, with money flying every which way with no concrete plans for monetization, which is a much bigger concern when there is little command for brand loyalty and switching is a click away.
Well, we all though that MySpace at $680 million was expensive too...guess we all got that wrong.
You guys are missing the value of the deal.
YouTube might not be worth $1.65B in Google stock on the books today, but 1) Google obviously believes they'll make that and more over the next three - five years on the property, 2) Nobody else gets the property, which has a ton of value in and of itself.
YouTube fits Google's "all the information in the world" model quite well - in that videos are (if you squint) a form of information. It's obvious they'd already seen potential there with their own video offering. Like most of their secondary offerings (GMail, Orkut, Froogle etc etc), it was never going to replace the market leader though.
I think this is a very expensive experiment to see what happens when they try to bring a proper, real-life leading brand under their own umbrella - in the same way that Yahoo bought Flickr.
$1.65 billion? Expensive, sure - but the potential to tie in with AdWords must be huge. TV networks are struggling to get the mass audiences of yesterday, but Google might be a way for them to buy into the whole online medium. I don't think the money will come from users, but from content providers.
Product placement advertising + online video content + Google's search and profiling power = a very powerful inroad for Google to start working on TV.
G has to delete all the copyrighted material e.g. TV snippets, which will terminate 40% of YouTube's content, so where to go now for uploading copyrighted material, if it's not allowed at YouTube?
Well Fluxx, I guess there are two point to take into account. - Google paid 1.65 billons in stock, so probably the amount could be pretty ambiguous. - Google makes money through advertising and your tube generates bunchs of traffic and viral effect.
As you I guess that that amount is ridiculous but anyways, we will see.
Juan Damia www.damia.com.ar
The hype of video media is upon us as advertisers look for a new and "cheaper" way to broadcast .. Youtube/Google is promising you a whole lot less with disk usage space ALREADY being already cut from 500mb to 100mb per session.
"HAVE NO FEAR- Google is laughing all the way to the bank"..
I too discussed this with my better half last night. I could only come to the conclusion that in order to make money out of YouTube the service to the customer would have to be made worse i.e. adverts in videos, subscription cost or similar. The added realisation of removing the copyrighted content immediately reduces its value. However I refuse to believe that any successful company would spend this amount of money without a good business and revenue model behind it. I guess we'll just have to wait and see. What if they start publishing copyrighted material for money like iTunes and just use YouTube as a way of delivering this.
I think Google wasted 500 million dollars. I mean would YouTube have said "No" if Google offered $1.15 billion instead of $1.65 billion ? Unless there was some top-secret bidding war happening, which would have got out faster than you can say Digg...
Both my wife and I talked about this last night. We both couldn't figure out how a company like that could be worth so much after just 2 years.
Shoe's blog post summed it up well. Honestly, I believe the purchase decision makes sense, but the price I'm not sure of.
What we know is:
1) G Video has nowhere near the viewership that YouTube has.
2) G wants to be the 800lb Gorilla in all that they do; now they are in the video space.
3) Owning the most visited sites in the World certainly doesn't hurt one's corporate valuation.
4) This is one of the largest "rooster blocks*" in the history of the Internet. Y & MSN are left vying for Facebook, a closed system offering ads that the student users are already unhappy about.
5) More pages to display AdWords.
*Keeping things G Rated. - Eric Itzkowitz
I agree. Don't get me wrong, it all makes sense in the short run. But I just don't think it's worth $1.65 billion dollars. The value of YouTube is based on its user base, not its assets, which is a bad idea as far as I'm concerned.
Time for me to get in my Google and drive to the Google to buy some more Google for my little Googles. Mmm the kool aid tastes fine.
I have to agree with the points that Shoemoney made on his blog yesterday: https://www.shoemoney.com/2006/10/09/10-reason...
Those reasons make sense for the short term, but what happens when someone leapfrogs YouTube and develops a better video site. It's not like YouTube has some trade secret or killer algo to fall back on...
I like that Jeff is catering to the Hispanic audience that's also confundido by Google's acquisition. How thoughtful!
Me llamo jefe!
I think it is extremely risky. MSN is coming out with Soapbox to compete and more importantly, Myspace is position their video service to compete directly with Youtube.
More videos are displayed to Myspace visitors every month than Youtube visitors.
I just don't think it was a wise move. The Myspace usebase is worth way more in my opinion because they're invested with the site. They have customized profiles and so on - so they would HATE to leave and do all of that over.
The average Youtube member, however, doesn't have their own videos and "following". They don't have anything invested so they can just pack their bags and leave without any hassle.
Rand, I'd like to have the problem of paying more taxes this year. hehe
- Eric
Google bought YouTube for $1.65 billion in stock. I don't know much at all about the stock market, but it looks like GOOGs stock went up a couple of points after the deal was announced:
https://finance.google.com/finance?q=google
A couple points means a couple billion dollars for Google, so basically they made money by buying YouTube...
Huh. But with buying YouTube, they have to pay to run it, which will end up costing them in the long run.
I don't think that's really a concern to Google. $1 mil is a piss in the bucket compared to what it costs to run G every month.
Another funny thing about the stock market - they don't get to re-issue those shares that are already owned, nor could they monetize the shares by selling them all. Google (the company didn't make any money), but their public owners (who have little control) may have to pay more taxes this year :)
YouTube was sold for $1.65 billion in stock, not in cash.
That's true, but stock is supposed to be a representitive value of the companies worth. It's not apples to oranges, but it's still fruit to fruit.
To my mind, the big mistake here is in assuming that YouTube as a brand is more valuable than video-on-demand as a service. Users switched from Yahoo! to AltaVista to Hotbot to Google. They're switching from Orbitz to Expedia to Kayak. They switched from Napster to Bearshare to Bittorrent. They switched from Friendster to MySpace.
I hope that Google made its valuation based on the ideas and people behind YouTube who will continue to make sure that their portal is the best one for video, because if anyone should leapfrog them in content or functionality, the users will follow. YouTube is a very, very easy site to leave without looking back. There isn't a lot that's keeping a user from moving to a Metacafe or DailyMotion if they like what they see better at those sites.
And, unlike Google, YouTube doesn't have the insurmountable algorithm and search index to make it tough to compete.
Also consider this, with Google purchasing YouTube they now also have a venue which is turning into a playground for social discourse and debate.
Think about this: Google has the world's largest index of personal information. Googel owns the major venues which are used for grass roots discussions.
Does Google then become more of a power house holding both the information and the venue? I wrote a post about this on my blog as well with tacticle examples:
Also consider this, with Google purchasing YouTube they now also have a venue which is turning into a playground for social discourse and debate.
Think about this: Google has the world's largest index of personal information. Googel owns the major venues which are used for grass roots discussions.
Does Google then become more of a power house holding both the information and the venue? I wrote a post about this on my blog as well with tacticle examples:
https://www.dannedelko.com/youtube-congress-in...