Google is to acquire YouTube for $1.65bn in an all-stock deal, in a move that may spark a flurry of M&A activity across the internet sector.
YouTube will remain a distinct, standalone brand, with the founders and all 67 employees remaining with the company.
Sequoia Capital was thought to be a key player in the deal. It owns about 30% of YouTube and was one of Google’s earliest investors. It still owns a bunch of Google stock and has a seat on the search giant’s board.
The speed of the deal, given its size, was incredible. Sources suggest that negotiations barely lasted a week. Google beat off competition from rivals such as News Corp, Yahoo and Viacom, to conclude the deal.
The deal is Google’s largest and mirrors the $5.7bn acquisition of Broadcast.com in the dotcom boom by Yahoo. Broadcast.com founder Mark Cuban recently said ‘only a moron would buy YouTube’.
Cuban’s comments seem to be intrinsically linked to the copyright issues that many thought would be the death of YouTube. But far from becoming ‘another Napster’, the company has overcome some initial problems with the world’s largest copyright owners.
In the past two months YouTube has forged deals with NBC, Universal Music Group, CBS, Sony BMG and Warner Music Group. More deals will surely follow.
The deals YouTube has brokered are all the more remarkable because less than a year ago the likes of NBC were locking horns with the company, over copyright violations.
But more recently the content owners have woken up to the fact that YouTube is a potentially fantastic marketing platform, and have decided to work with it, rather than against it. YouTube is creating channels for the likes of NBC, which will manage its own content, in part to guarantee quality.
YouTube has in a short space of time become the de facto destination for anybody looking for video online, despite some serious competition from the likes of Google and Yahoo. It was only a matter of time before the company was acquired.
Our congratulations to Chad Hurley and Steve Chen, YouTube’s founders, who only registered the company’s domain name as recently as February 2005, launched the site in beta form in May 2005, and less than 18 months later have sold out for megabucks to an internet heavyweight.
The YouTube founders have posted a hilariously giddy video on the site, where they explain what the deal means for the YouTube community before cracking up.
Smart move, Google.