Google is buying video-sharing website YouTube for $1.65bn (£883m) in shares after a weekend of speculation that a deal was in the offing.
The two companies will continue to operate independently, Google said as it announced the news on Monday.
YouTube, launched in February 2005, has grown quickly into one of the most popular websites on the internet.
It has 100 million videos viewed every day and an estimated 20 million individual visitors each month. ‘Natural partners’
“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,” Google chief executive Eric Schmidt said in a statement.
He said the two companies were “natural partners” to offer a media entertainment service to users, content owners and advertisers.
YouTube will retain its brand, and its 67 staff including co-founders Chad Hurley and Steve Chen will keep their jobs.
“Our community has played a vital role in changing the way that people consume media, creating a new clip culture,” said Mr Hurley.
“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.” Music tie-ups
The announcement came after a day of distribution deals drawn up by the pair.
Universal Music Group has signed a distribution deal with YouTube, which will protect the rights of the music firm’s artists.
YouTube also says it has signed a deal with CBS, which will offer short-form video programming, including news, sport and entertainment on YouTube.
Google has also signed distribution deals of its own, with Sony BMG and Warner Music to offer music videos.
The Google deals should allow internet users in the US to be able to view music videos, artist interviews, and other footage from the two firms on Google video for free from this month.
The content is sponsored through a Google advertising-supported revenue-sharing agreement.
Google also said that in addition to the advertising-supported video content, music videos from Warner would be available for purchase as downloads at $1.99 each.
As part of YouTube’s deal with CBS, the companies will share revenue from advertising sponsorship of CBS Videos.
There is already a YouTube clone software available in the market (underground i.e). It looks very much like YouTube and runs on the same principles. The difference ofcourse comes when high-end servers get involved which every Tom, Dick and Harry doesnt have and also the tech support.
I think Google will end up integrating YouTube to their currently existing video service where you can still search for videos of sports games, movies and concert but they'll charge you something like $5 to view it, now that really sucks.
Looking at it from a finance prospective, Google executives have too much cash on their hand. Even the best of the minds don't know what to do with that kind of money.
Look at Google's balance sheet, as of June this year they had almost $4 billion dollars in cash, and $6 billion in short term investments (almost 70% of their total assets). Any company with kind of liquid asset has to do something with it before the investors get suspicious. The easiest thing to do is go buy a competition.
But that doesn't mean its good for their business or consumers. I personally think Google over paid for the services it will get mainly considering the fact that youtube is in trouble on copyright infringements and it has yet to figure out how to make a profit, but I guess Google can afford to pay that kind of dough.
Look at their balance sheet for next quarter and see their 'Goodwill' column balloon up!
Folks, read the fine print. This was not a cash transaction, only funny money was exchaged, i.e. stock. And as we all know Google is overpriced and will come down when bubble is busted; just look at the P&E ratio :)
How bad would it feel to be Jawed Karim (Bengali/German background) right now. The third co-founder of youtube who left the company to pursue his degree at Stanford. I'm sure he would've been a lot richer today along with these two if he'd stuck with the plan. Maybe his two co-founder fellows will give him some backstage bling, but he shouldv'e definitely stayed with 'em for the full ride.
jk