According to Cnet.com, Google’s CEO Eric Schmidt said under oath, that he told Google’s board of directors that his estimate of YouTube’s worth was somewhere between $600-$700 million, at the same time it went out purchased YouTube.com in 2006 for $1.65 Billion dollars.
It’s a very interesting and unique insight to one of the most successful company in the world decision to overspend on YouTube.com and acquire it for a Billion dollars more than they thought it was worth.
You can read the entire post here
No real problem or penalty for him, the shareholders paid the freight for that shortsighted decision. There is no reason to believe such bad corporate decision making will change either.
J-
Not sure it was a bad decision at all.
The guy knew he was overpaying but sometimes you have to “overpay” for something that makes sense in the long run
Youtube over valued? Check out Twitter’s valuation!
So far time shows it was a bad decision, sure there is a chance time will show it was a good decision, but since time is money the chances of that are low. Yahoo’s purchase of broadcast.com in 2000 for $1B probably seemed like a steal for Yahoo. But time showed that was boneheaded just as many (shareholders) said at the time of the purchase. Can’t compare .com pre-bust day to today? Twitter’s revenue-less mirage valuation shows Kool-Aide drinkers are just as resistent to reason today as they have been through time.
Google didn’t pay 1.65B in cash for YouTube. They valued the transaction at that price, but the actual payments were tied to performance during a certain time frame.
It sounded like it was an impulsive defensive purchase.
Like they were thinking to themselves:
“Other competitors are interested. Hurry! let’s buy them and figure out what to do with it later…”
John
unplain dot com
Lea
Overvalued at the time it was purchased back in 2006 not based on today’s valuation.
Twitter did not exist in 2006
Juan
It was a stock acquisition valued at $1.65 Billion.
I do not see any incentives or performance tie in’s to the purchase
http://www.techcrunch.com/2006/10/09/google-has-acquired-youtube
Very interesting when looked at through the lens of the domainer who’s PPC revenues have been declining since?
In some fashion it looks like domainers have helped finance the 1 Billion Dollar Premium.
Ghetto
No doubt Google can just turn down the black box on domainers payouts a couple of notches and make up for the billion dollar overpayment.
MHB: My understanding is that the stock has all sorts of restrictions (vesting rules based on performance). I could be wrong! 🙂
Knew that all along…useless website
I don’t know how much revenue is generated for Google by YouTube, but the site is becoming (if not already) the definitive video repository for everything. Plus lots of new, updated video added on a constant basis. You can perform some deep searches with Youtube and find video unavailable anywhere else.
I think it is too early to determine if Google really overspent because Youtube is evolving and expanding ongoing with no end in site. Schmidt anticipated that Youtube’s relevance and value would rapidly increase. Look at Google. From total obscurity to unreal growth in a very, very short period of time.
Max
I think it was a good acquisition for Google and as I said sometimes you have to overspend to get something quite special
“one of the most successful company in the world”
no, Google hasn’t “overpaid” YouTube but (simply) the Google’s “geniuses” aren’t able to make money with it!
many think (and say) that Google is a successful company (like Microsoft, Amazon, eBay, etc.) thanks to its great “ideas” and super engineers and programmers, but it’s NOT true!
despite the lots of money invested, nearly ALL Google’s services have FAILED to succeed
its Wikipedia-like Knol has failed, its SecondLife-like has failed, its PayPal-like has failed, its eBay-like has failed, Chrome has a modest market share and much lower is the Google Docs market share if compared with offline softwares like MS Office or OpenOfficeOrg
Google is “big” and make lots of profits ONLY thanks to its near-monopoly in the online advertising (and thanks to millions NON-Google websites and online services that host its AdSense ads…) while, all other Google-things always are a GIANT FAILURE
Google will be able to make money with YouTube ONLY the day when its “geniuses” will find, on the web, a good (online-video-related) marketing idea to “use freely” …that means “without pay a cent to the inventor(s) of the idea(s)”
like happened (e.g.) with the “””””Google””””” Lunar X Prize… http://ow.ly/st4C
.