Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Google buys YouTube for $1.65 billion

Posted by Richard Koman - October 9, 2006

Google is officially the proud new owner of YouTube. It's a $1.65 billon, stock-for-stock deal. According to the Google press release, "When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own fast-growing video business. " The deal has been approved by both corporations and is expected to close in Q4.

I just got off of the conference call on this deal, so here the notes I was able to take. You can listen to the full call at 888-203-1112, confirmation code 2260624.

Eric Schmidt: The music deals of this morning show the growing value copyright holders place on video. YT is one of many investments Google will be making in video. YT is a social phenomenon that I've never seen before. The thing that tipped us over was their vision. YT/Google will create a new and very interesting platform.

Chad: We're in the midst of a shift in control of entertainment. We'll sharpen our focus on this vision and Google's revolutionary ad platform has inspired us to create a revolutionary new video platform.

Sergey: Video is a very important part of the world's information. When you think about search, oftentimes when you want a true explanation of something what better way to get it then to see a video of it. Video is a great medium for advertising. I expect YT will be a great channel for advertising. It's hard for me to imagine a better fit - technically and culturally. YT reminds me of Google just a few short years ago.

Q: Why did Google need to buy YT? Why stock, not cash? YT cost structures?

Eric: When we looked at our mission, Video Google was doing very well. There were lots of interesting content and partnerships. The marketplace showed a clear winner in social networking in video.

David Drummond (Google's corporate development VP): We did a stock deal it order to make it tax-free for the YT shareholders. It's a good deal for them and it made it cheaper for us, as well. We're pleased YT shareholders wanted to be Google shareholders.

Q: YT's new ID architecture?

Steve (YT's chief of engineering): We've been hard at work at identifying users and partners can ID their content such as fingerprinting, audio fingerprinting, keyword searches. We're on track to launch within the month.

Schmidt: In the short time the engineering teams have had to work together, they're come up with 20-30 ways that the two companies can extend each other's technologies. We don't lack for a set of ideas. Most people believe this is just the beginning of a video revolution.

Drummond: The price was modeled on a synergistic model. "We arrived at a price that's very fair and reflects great value that YouTube has created."

Sergey: "We care very much about search and to increase the comprehensiveness of search. We're also working on the advertising side of video - but there's more experimentation to be done there."

Schmidt: Google Video will not go away. "It's a very important part of the Google user experience and it's going to be more even more integrated with Google overall."

Sergey: "The general sense we've taken from MySpace, there's a new class of site that have dev very quickly are very successful and are very attractive to users - it's a next generation of sites and companies. We're excited to work with them in all sorts of ways."

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