Google acquires YouTube (online video sharing)

Companies in Relationship

Google, YouTube

Deal Facts

Initial Announcement Date: 10/06

Consideration: $1.65B stock-for stock transaction that included $21 million in cash payments (Source: Google 10-K)

Google announced that it has agreed to acquire YouTube, the consumer media company, which displays a wide variety of video content as well as amateur content, for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will operate independently, retaining its brand and all their employees, including co-founders Chad Hurley and Steve Chen.

Strategic Implications

Google's slow traction with its own video site has been a major factor fuelling its interest in the acquisition of YouTube. Google Video was building its business by working cooperatively with major content producers to protect their intellectual property and avoid any piracy of their work: movies, television shows, music videos, etc. Therefore, the content on Google Video largely consisted of home videos. YouTube, meanwhile, took a much more aggressive approach. They did not censor user-generated content to control for concerns over piracy.

The transaction makes sense in terms of the combined audience, which is largely unduplicated according to comScore data. Google's ability to monetize video streams through sponsorships from its large advertiser base combined with the high magnitude of streams on YouTube could potentially create a significant revenue opportunity in branded advertising, an area where Google has historically trailed. Google's relationship with content owners could provide YouTube access to premium video content, thereby assuaging some of the problems related to copyright on the site.

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