Friday, October 13, 2006

1.67 Billion down the Tube

Google's purchase of YouTube was, in my humble opinion, stupid. In that google fails to recognize what YouTube's biggest attraction is. (At least to me)

You Tube frequently hosts entire episodes of television shows and large quantities of copyrighted material.

Google frequently deletes this material from google video.

So when Google owns YouTube the copyrighted material will actually have to be removed. And I think this is going to drive traffic levels down significantly as viewers find other sites that host the last episode of South Park.

Now, obviously I could be overestimating the amount of copyrighted stuff on YouTube. There are certainly a lot of home movies and such. It would be interesting to see how much traffic was generated by copyrighted items vs. non copyrighted items. I hope Google did that analysis before they made their purchase.


Sphaeron said...

Interesting thoughts. From what I understand, Google currently plans to let YouTube run itself with its existing leadership and staff. How long that lasts, well... who knows.

Then again, how long do you think YouTube could continue to house all this copyrighted material anyway? It's just a matter of time before they start getting the RIAA treatment, right? :)

In other news: holy crap does Google have a lot of cash, eh?


Shinobi said...

Seriously, that is a lot of Cash. Perhaps they would like to buy my company, bidding starts at 100k, and that's chump change to them!!!

(I'll just have to make up a company now.......)

Kav said...

Apparantly, no cash swapped hands. It was bought with stock in Google though the deal is that You Tube cannot sell the sock (perhaps for a certain amount of time) only collect dividends. So those who sold You Tube are also gambling that Google continues to do well.

hrun said...

Well, the deal is even better for Google than you might think.

Rumors of the takeover were circulated first on Friday: Google's stock rose by 2%.
The announcement was made on Monday: Google's stock rose by another 2%.

The total amount of $1.65 Billion is only about 1.2% of Google's market cap.

Thus, they diluted their stock by about 1.2%, but while the deal was announced, Google shares gained about 4% in value. In order to see what (if anything) the deal cost Google, we'd have to estimate how much Google's stock would have risen without the announcement.

In either case, this does put the acquisition in perspective: It took half a day for Google's value to increase enough in order to offset the purchase of YouTube.