Google Announces Acquisition of YouTube for $1.65B

As predicted, Google announced acquisition of YouTube for $1.65 billion in an all-stock deal, making the transaction tax-free for YouTube shareholders. You can listen to the Webcast here. It would be difficult to exaggerate the impact this acquisition will have on the Internet landscape, especially the impact on Google's chief competitors' Yahoo! and Microsoft. The acquisition is expected to happen in Q4, and the number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition.

YouTube has a 45% marketshare of online videos, and the acquisition will dramatically improve Google's video-sharing service. Approximately 100 million videos are available on YouTube on any given day, with 65K new videos added every day. According to Nielsen Net Ratings, YouTube enjoys 20MM unique visitors per month.

The acquisition leaves Microsoft and Yahoo! in a more precarious position to compete with Google in the online space. It was rumored both were considering acquiring YouTube, but both passed in favor of starting their own video-sharing service. Microsoft launched their own video service called Soapbox in beta on September 16th, with little success. In reaction to today's announcement, Whitney Burke, a spokeswoman for the company stated:

"We are excited about the potential we are seeing in the beta of Soapbox on MSN and believe building our own solution is a more cost-effective way to compete in this new space."

It is good that Microsoft is excited about its own service: apparently no one else is. Microsoft has more cash in its war chest than Google, but emphasizes they are taking a "more cost effective way" to compete, but how well does this serve the company and shareholders when they are losing the war. Pathetic. But then again Microsoft has always been followers, and not innovators, and that may have worked in the past, but the disruptive nature of the Internet will ultimatetly prove that approach unsuccessful.

However, the scope of this acquisition goes beyond the Internet, and affects the media space in general. Tom Brokaw lamented tonight on "NBC Evening News" in response to the acquisition "They don't build media companies like they used to." No they don't Tom, so you might as well get used to your declining viewership. You may not get it, but your employer apparently does, as NBC folded in its request that YouTube pull its clips of "Saturday Night Live," and instead cut a deal with YouTube to allow users to post content from NBC programs.

One of the reasons I love working in the Internet industry is that it is so disruptive, and although Google is now benefiting from this, it could one day become the victim of it. What is good for the goose, is good for the gander, and I look forward to writing about the company that first disrupts Google. I'm not holding my breath.

technorati tags: google, youtube,
microsoft

Google in Talks to Aquire YouTube for $1.6B

WSJ reported on Friday that Google and YouTube are in early acquisition talks. The rumored price tag is $1.6B. Founded in February 2005, YouTube has experienced phenomenal growth: they are currently ranked in the top 20 trafficked sites in the U.S.: 15 months ago they were not even in the top 100K:



Here is an Alexa Chart comparing traffic trend of Google and YouTube:



Prediction: This deal will get inked, and sooner rather than later.

technorati tags: google, youtube

Internet Titans Take Different Approaches to Content Generation

I dislike the often repeated phrase "Content is king" when referring to the internet. It's a tautology that conveys no real meaning, kind of like saying oxygen is important for life. What is interesting is how the major internet companies approach content. The Internet titans are each taking a different approach to content generation, with Google stating last week that it is sticking to its mission statement to "organize" and "make accessible" information, not to create it.

"We don't really have a ton of serious conversations about creating content," said Tim Armstrong, vice president of advertising sales, said during a panel discussion at an Interactive Advertising Bureau event in New York. Instead, he said, Google would prefer to stick with "getting users where they want to go."

Yahoo! has a much bigger stake in content generation, and went through some internal in-fighting this year in regards to the best approach to take. Lloyd Braun, former chairman of ABC Entertainment Television Group whom Yahoo hired in November 2004 to head their Media and Entertainment division, wanted to take a traditional television model to the Internet: create a series of one-off hits to attract and sustain large audiences supported by advertisting. His original strategy was to create sit-coms, talk-shows and similar television-like content for the Internet. Other Yahoo! executives, in particular CEO Terry Semel, disagreed with this approach, and instead favored acquiring content through partnerships and licensing deal as well as through user-generated content. Mr. Braun lost the battle in typical corporate fashion: his budget was seriously cut. Rumors circulated that Mr. Braun was going to leave Yahoo! over the dispute, but he stated back in March that he had has seen the error of his ways:

"I didn't fully appreciate what success in this medium is really going to look like," he said. "This is not about creating one-off hits like in my old business. That is not going to create a sustainable competitive advantage over the long term."

However, another Internet titan is taking the opposite approach, and the one originally championed by Mr. Braun. Ironically, it is from a company that was one of the first to bring user-generated content to the internet in a large scale through customer written book reviews: Amazon.com. Amazon now seems intent in creating highly produced original content on a grand scale: Amazon has hosted a series of short films, video streamed its 10th anniversary concert featuring live performances by Nora Jones and Bob Dylan, and most recently, Fishbowl, the 12 episode talk-show hosted by Bill Maher. Amazon has publicly stated that Fishbowl is just the first of many 12-episode programs that it plans to air. Amazon has also purchased the rights to turn the best-selling novel "The Stolen Child" into a feature-length film.

I won't speculate as to which approach will be most effective, although Google is probably in the most enviable position by simply side-stepping the need to create original content and still make money in volumes that Yahoo! and Amazon can only hope to do so. I guess it really is good to be the king.

technorati tags: google, amazon, yahoo