Marcus Cake

Google has acquired Youtube, an online video sharing service, for US$1.65B in Google stock. Youtube has approximately 45% of the online video sharing market. Youtube has 100 million videos available to view and 20 million unique visitors a month. As far a I know, YouTube does not earn revenue. Youtube was established less than two years ago and has received US$11.5m in venture capital funding to date. The sale price price provides an exceptional return on investment. Additional information is available from this CNET article.

Extract from CNET article

• YouTube’s suitors over the last six months have, according to reports, included Microsoft, Yahoo, News Corp. and other online and traditional media giants looking to get in on the viral video craze. However, the process of trying to determine YouTube’s value over the last six months reminded more than a few analysts of the dot-com bubble frenzy in the late 1990s, when companies were being purchased based on a user base and a dream, regardless of whether they were actually able to turn a profit.
• Google used a “synergistic” model to value YouTube, said Drummond, declining to elaborate on just exactly what that meant but acknowledging that traditional “standalone” methods of putting a price tag on the company were hard to use in this situation.
• Executives pointed to the similarities between a young YouTube and a young Google as one of the reasons for the acquisition. “Everyone here knows they’ve built an extraordinary business and phenomenon. The thing that tipped us over was not business success or working relationships but the vision of serving users,” Schmidt said.
• Still, the combined organization will need to make money serving those users. The early strategy appears to be a combination of targeted advertising next to YouTube videos combined with better search technology for helping content owners identify copyright violations.

The .Net boom previously forecasted appears to have arrived …