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October 9, 2006

Google buys YouTube

Posted by David Hunter at 5:48 PM ET.

This morning’s Microsoft Blinkx tie-up story may have turned out to be a dud, but the Google YouTube acquisition rumor panned out to be US$1.65 billion of gold:

Google Inc. announced today that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction.  Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community.

The acquisition combines one of the largest and fastest growing online video entertainment communities with Google’s expertise in organizing information and creating new models for advertising on the Internet. The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience.

When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own fast-growing video business.  YouTube will continue to be based in San Bruno, CA, and all YouTube employees will remain with the company. With Google’s technology, advertiser relationships and global reach, YouTube will continue to build on its success as one of the world’s most popular services for video entertainment. 

The number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition. Both companies have approved the transaction, which is subject to customary closing conditions and is expected to close in the fourth quarter of 2006.  

Marshall Kirkpatrick at TechCrunch has some estimates on how the loot will divvied up.

Update: Todd Bishop has the Microsoft reaction:

Where does Google’s $1.65 billion YouTube acquisition leave Microsoft? The question is particularly interesting in light of reports that the Redmond company was one of those that talked with YouTube about a possible deal.

Asked about those reports today, Microsoft didn’t precisely confirm them, but didn’t directly deny them, either. In a statement, the company said it “evaluated acquiring this type of technology several months ago” but decided that building its own video-sharing service would be “a more cost-effective way to compete in this new space.”

Filed under Coopetition, Google, MSN, MSN Soapbox, MSN Video, Microsoft, YouTube

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One Response to “Google buys YouTube”

  1. Ballmer comment on Google YouTube acquisition -- Microsoft News Tracker Says:

    [...] Yesterday’s Google acquisition of YouTube is being endlessly dissected today, but Steve Rosenbush has an interesting article at Business Week Online on the implications for Google competitors including Microsoft: The software giant considers Google a top rival and a threat. Google already challenges Microsoft by creating free online software applications that compete with Microsoft’s spreadsheet software and other products. Microsoft’s MSN site competes with Google in search, advertising, video, and online media, and Microsoft reportedly had an interest in buying YouTube. [...]

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