Google Buys Up YouTube

The Birmingham Post (England), October 11, 2006 | Go to article overview
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Google Buys Up YouTube


Byline: By Eric Auchard Special correspondent

Web search leader Google has agreed to acquire top video entertainment site YouTube for $1.65 billion (pounds 877.6 million) in stock, the highest price yet paid for a consumer-generated media site.

The first deal to value one of the new generation of user-participation Web sites at more than $1 billion combines two of the most popular Internet brands: Google, synonymous with Web search and rapid innovation, and YouTube, a Silicon Valley upstart that has spearheaded the video-sharing craze.

YouTube, which grew in 19 months from a start-up in a garage to now serve 100 million videos daily, has drawn scrutiny from major media companies for copyrighted television and music videos that users post without owner consent.

While YouTube said it had signed a spate of distribution agreements with major record labels, analysts say Google could still be inviting lawsuits with this acquisition.

Nonetheless, in anticipation of the deal, investors pushed shares of Google up two per cent on the Nasdaq on Monday to a closing price of $429.00 - a level not seen since late April. In extended hours trade, Google climbed to $431.55.

"YouTube is phenomenally valuable in terms of traffic and in the Internet sector this is important just like location is important in real estate," Oppenheimer analyst Sasa Zorovic said of combining YouTube with Google's advertising machinery.

Analysts said the deal would thrust Google quickly into the emerging market for video advertising, where it has only a tiny foothold compared with Yahoo and start-ups.

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