Commentaries
Now raising intellectual capital
Gut feeling: How Google CEO valued YouTube deal
Let the second-guessing, the mock horror, the disbelief, the crowing begin.
Google CEO Eric Schmidt has acknowledged he realized upfront that he was overpaying to acquire YouTube, to the tune of $1 billion, judged by any conventional measures.
The many critics of Google’s $1.65 billion deal to acquire the video-sharing site three years ago will claim this confirms everything they have always said about the deal. Not quite.
In fact, not really at all.
Schmidt came clean in a deposition by lawyers in the Viacom copyright lawsuit that there was very little revenue coming into YouTube to justify the price his company paid.
No surprises here. There were intangibles to consider:
1. YouTube’s popularity was sky-rocketing, making it the runaway market leader among video-sharing sites. 2. It was crushing his company’s own site, Google Video. 3. YouTube was up for auction and would be sold to a competitor unless Google jumped first. 4. Google overbid to ensure YouTube didn’t fall into rival hands.
Saying boo to Micro-hoo: Eric Auchard
LONDON, July 29 (Reuters) – There’s been a bonfire of shareholder value at Yahoo and the blaze is not out yet, even after the agreement to a long-delayed deal with Microsoft.
Eighteen months ago, Yahoo walked away from Microsoft’s nearly $45 billion acquisition offer — a 60 percent premium to Yahoo’s then market value.
Fast forward to today and there is a zero premium being offered by Microsoft. And that’s after Yahoo also spurned $9 billion from Microsoft to buy just Yahoo’s search business. Still, investors had been hoping Microsoft might pay at least $1 billion in up-front cash to Yahoo.
No chance. Instead, Yahoo is receiving face-saving revenue guarantees for search advertising sold on Yahoo’s own sites for the first 18 months after the Microsoft deal takes effect.
Think ahead to 2012, the Olympics. That’s when Microsoft and Yahoo expect to finish fighting for regulatory approval, closing the deal, dividing up assets, putting their plans into effect and re-launching services.
The agreement is not an acquisition, but for Microsoft, it might as well be, as it gets control of the key levers.
For Yahoo shareholders, it’s value destruction not seen since the misguided merger of America Online and Time Warner at the peak of the dot-com era. The parallel between what is happening to Yahoo and the decline of AOL is instructive.
#Twitter business math: Counting backward from billions
$140,000,000 = Projected 2010 revenue in U.S. dollars according to Twitter February 2009 financial forecast leaked to TechCrunch. (*2)
100 million = Projected number of Twitter users in fourth quarter 2010 according to leaked spreadsheet. (*2)
75 million = Twitter members in May 2009 based on rough calculation of worldwide users, extrapolated from comScore and All Things D data (*3, *4)
I’m curious how they plan to make this revenue jump:
$4,400,000 = Projected 2009 revenue
$140,000,000 = Projected 2010 revenue
from MediaFile:
Data Domain, EMC’s deal that nearly got away: Eric Auchard
-- Eric Auchard is a Reuters columnist. The opinions expressed are his own -- By Eric Auchard
LONDON, July 10 (Reuters) - The quickest way to attract a marriage proposal is to draw the attentions of a rival suitor.
When Data Domain <DDUP.O> agreed terms with fellow data storage company Network Appliance <NTAP.O> it concentrated minds at EMC <EMC.N>.
The upshot is that EMC is now paying an eye-watering six times sales for Data Domain, one-third more than NetApp first proposed to pay.
EMC could not bear to simply stand and watch. Data Domain has technology that threatens EMC's business model. Its products reduce demand for existing data storage hardware by as much as 20 times.
The winning bid is nearly double Data's price before the Network deal emerged six weeks ago. It has emerged that EMC had talked to Data but never made a formal offer. This now looks distinctly careless.
It's clear that EMC could have won Data Domain for significantly less, and a glance at the technology shows how badly it needed the purchase. EMC may be the market leader in data storage. But its software and operating system is the key to its success, and Data's products make existing systems much more efficient.
-
The Wall
Yet, the author fails to mention perhaps the most important reason Google bought YouTube– to defend online content.
If Google’s objective is eyeballs– and we can all agree that it is– then it would benefit Google to have Internet users across the world being able to infringe copyright, i.e. upload copyrighted movies, tv shows, and clips.
At the time of Google’s purchase, the number one threat to YouTube’s success were lawsuits from copyright holders.
Without having the resources and clout of a serious parent company (i.e. Google, Microsoft, Newscorp, or maybe Yahoo at the time) YouTube would have been sued, and subsequently lost in the courts, therefore, setting a precedent that would have been much more detrimental to online video, and Google’s business, than overpaying for YouTube. Even at a price of more than $1.5 billion.
Don’t be fooled, Google knew exactly what it was doing when it agreed to pay more than 1 billion extra than it had “valued” YouTube, which was, reducing a threat to its business- which isn’t search, but rather attention. skh