Is Google Crazy To Pay $1.65bn For YouTube?
A profitless website started by three twenty-somethings after a late-night dinner party is sold for more than a gigantic sum, turning dozens of employees into paper millionaires.
It sounds like a tale from the late Nineties dotcom bubble, but it happened when Google paid $1.65bn for YouTube, the video-sharing phenomenon that is the darling of the internet resurgence known as Web 2.0.
Launched just 18 months ago, YouTube is still based in rat-infested premises above a pizza shop, yet virtually every big media and technology company has coveted it for its 35 million viewers. After the deal the two remaining founders, Chad Hurley and Steve Chen, posted a video thanking their users - then succumbed to fits of giggles.
As well they might: this second internet boom is exactly like the first one. As any YouTube junkie knows, the site can change viewing habits forever… why gawp at a programme schedule planned by someone else when you could be joyfully hopping from Bill Clinton’s recent explosive interview… through ancient newsreels of the Cuban revolution, and on the a Beatles video you’ve never seen before.
The business rationale is the same one that Rupert Murdoch bought into with MySpace: these sites create an instant club, and if anyone can transform that valuable commodity into a new marketplace, Google can. Even if YouTube never makes a penny, the damage will barely register on the $130bn behemoth that is Google, but there are bigger issues at stake.
Both Google and YouTube rely on free content to drive their businesses: neither can seems to care a fig about the law of copyright. And while some music and film companies have struck deals on the basis that if you can’t beat them you must join them, this business model remains dangerously exposed.
The truth is that it’s too early to say whether YouTube - or Google for that matter - is ridiculously overpriced. We should see this deal for what it is: a land grab.