Google Got YouTube Cheap
There is a lot out there on the big news of the day, Google acquiring YouTube. Most imply that Google paid up and that the deal was fairly priced. I am contrarian on this one. I think Google got a really good deal.
Compare Google to YouTube. YouTube does 100M views a day, most of those are through links people put on blogs and send to each other but some of them are search results from YouTube's page. Actually all views can be considered search results even though what orignated them many not be actual searches. They serve the result, effectively. So each view on YouTube is the analog of a search on Google. What does Google do per day? Google does a little less than 100M searches per day, see here. So Google is doubling their daily searches with this acquisition.
And they have the potential to be higher quality searches. They may not be monetized today, but tomorrow they can be, and arguably there are better ways to put ads in video and get much higher CPMs (TV is $10-20 vs. <$1 on the Internet) So clearly video ads are worth more.
And here is the best part in my view. Google gave up a little more than 1% of their company to get as many 'searches' as they have today with better monetization potential.
That's sounds like a great deal for both sides. Congrats to all involved.
Good point!
Any ideas on why MSFT passed on this opportunity? They certainly have cash. YouTube could have been a great opportunity to capture ad revenue in the online video space for MSFT.
Posted by: Baris Aksoy | October 10, 2006 at 12:10 AM
Google paid stock not cash, but either way they have the market cap and the cash.
I think Microsoft is not thinking big, they are thinking Vista.
Posted by: Baris Karadogan | October 10, 2006 at 12:17 AM
Good thought, I would have missed this part of the story if not for your article!
Posted by: Brajeshwar | October 10, 2006 at 02:12 AM
Yes very good points, I agree with you. I think the legal problems of YouTube was the weakening point in their price negotiations. YouTube knew that they can't face legal challenges all alone. On the other hand, Google is very powerful and, with Al Gore in their advisory board for instance, has tight connections with US government. So both needed each other (Google Videos couldn't catch YouTube's popularity) and that's why the price was not "so so" high.
Posted by: Emre Sokullu | October 10, 2006 at 02:44 AM
the stat that Youtube gets 100M searches a day is incorrect. 100M page views are different from searches. yahoo.com gets arnd 400M visits a day, that doesnt mean they get so many searches.
Posted by: lazy | October 13, 2006 at 02:00 AM
YouTube serves 100M video views per day. Not pageviews. I consider each view a search result, because that's where you serve ads, like searches.
Posted by: Baris Karadogan | October 13, 2006 at 07:42 AM
Interesting points on Franck Poisson's blog (french) too.
He thinks similarly, but for him, the main reason is the current financial data of potential acquirers and the potential revenue sources of YouTube.
The other reason is search IP of YouTube. But I don't agree with this.
Posted by: Emre Sokullu | October 19, 2006 at 10:49 PM