Google Acquires YouTube for $1.65 Billion

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So the rumor was true. Google has acquired YouTube for $1.65 billion in stock. Officially closing sometime in the next four months, YouTube will continue to remain and operate as a separate company in San Bruno, California with its 65 employees. Rumors are forming now about a bidding war where Yahoo! was involved right till the end. Read the official announcement here.

This being Google’s biggest acquisition to date, their plans for YouTube is different to those they’ve done previously to other companies (integrate them to the Google product-line and close it down in true early Microsoft-style). In a nutshell, they’re going to leave YouTube alone, provide as much backing, relationships, technology and advertisers as they need, and see how the profit margins take a stance. Ironically, many of these things stay true to the predictions I made on the post on why Google will acquire YouTube. Also consequently, Google Video, yes, YouTube’s prime competitor, will stay as it is.

This morning Google held a webcast and conference call session with Eric Schmidt (Google CEO), Chad Hurley (YouTube CEO), and a few other people. I missed the event, as I’m sure did many others, but thankfully EarningsCast has an audio-recording available. The Google-YouTube heads answered many questions, and to what I could make out of it, they were pretty uptight with what they had to say and stayed with the ‘Google and YouTube were made for each other, and it’s all good’ viewpoint. On a related topic, YouTube co-founders Steve Chen and Chad Hurley also posted a video as to what this means for its users.

The most staggering thing about this whole thing is that Sequoia, YouTube’s lead investor which got away with 30% of the company for an $11.5 million investment back in March, could take upto $400 million with this deal. Not only does this give hope to other startups and VC firms, but I think it goes to show that the VC model isn’t dead as some may think.

My own take on this deal is that YouTube, which I have to admit I’ve been using ever since last August when I first heard about it, is in good hands with Google. Some people predicted that if Google bought it they would ruin the whole craze, lock the doors to the phenomenon that’s taking place, and try to make their dime out of it. This isn’t the case, obviously. Google has realized what they’re carrying on their shoulders, and as one of their most successful acquisitions or products, want to turn it into something even bigger.

[tags]YouTube, Acquisitions, Google[/tags]

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