Google to buy YouTube for $1.65 billion in stock
With the upstart YouTube Inc. upstaging Google Video in number of visits and video streams, Google Inc. has agreed to buy the 20-month-old company in a stock-for-stock transaction valued at $1.65 billion. The deal, expected to close in the fourth quarter, increases by tenfold Google’s potential video-based ad revenue, experts say.
“In acquiring YouTube, Google has, in one fell swoop, increased their number of video streams—and potential ad revenue from streaming—tenfold,” says Gian Fulgoni, chairman of researchers comScore Networks Inc.
YouTube ranked third in the number of Internet video streams in July, with 649 million for a market share of 9%, while Google ranked eighth with 60 million and a share of 1%, comScore says. MySpace.com led with 1.5 billion video streams and a market share of 20%, followed by Yahoo with 812 million and an 11% share.
"The YouTube team has built an exciting and powerful media platform that complements Google`s mission to organize the world`s information and make it universally accessible and useful," says Google CEO Eric Schmidt. "Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers."
YouTube CEO and co-founder Chad Hurley, who with co-founder and CTO Steve Chen announced the deal Monday night in a video punctuated with laughter and posted on their site, says joining Google will provide the resources YouTube needs to innovate and grow. “By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners," he says. "I`m confident that with this partnership we`ll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide."
Hurdley, Chen and their employees will remain after the acquisition, as YouTube retains its brand identity and continues to operate from its based in San Bruno, CA.
The acquisition follows sharp increases over the last several months in U.S. Internet traffic garnered by YouTube, while Google’s share of overall Internet traffic has remained relatively flat, according researchers Hitwise. In September, YouTube’s share of U.S. Internet traffic reached 0.27%, more than 4 times the 0.063% share of Google Video, Hitwise says.
In late June, traffic from all of Google’s sites began sending more traffic to YouTube than to Google Video, Hitwise says. After Google moved its Google Video link to its home page in August, traffic to Google Video jumped from a market share of about 0.025% to 0.063%, while YouTube’s share rose from about 0.21% to 0.27%.
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