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You Tube-A Question of Valuation

You can listen to the the Forbes media analyst  discuss the Google purchase of You Tube at the hyper link.  Here are the facts
You_tube
You Tube is an on line service that allows folks to exhibit their streaming video clips.
It has only been in business for 1.5 years.
We do not know if or how much money You Tube makes.
Google has only been in business for six years.
Google is acquiring You Tube for $1.65 billion, but wait, that’s $1.65 B in stock, not cash.
Did it really cost Google $1.65 B if they did it in stock?

The Forbes analyst differs this from the dot.com craze by pointing out that You Tube did not go public but was acquired by someone, Google, that is supposedly financially sophisticated. And if it fails, thousands of investors are not hurt, but presumably Google learns a lesson.

Here are some contrary thoughts on the deal from Mark Cuban , owner of the Dallas Mavericks, and someone who has made considerable money from high tech himself.  Another huge issue here is IP or Intellectual Property.  Seems that when one just starts posting any and every video, someone is liable to claim they own the video and want payment.  One reason for this deal is that Google might better be able to protect fledgling You Tube from lawsuits.  Actually as you can see from Cuban’s comments, the whole issue of IP is under attack.

Update-Daniel Henninger is the Deputy Editor of the WSJ Editorial Page, his thoughts on You tube appear here.  He does make the point that Google needs to improve the search engine for You Tube.

What do you think? Is a start up 1.5 yr old company that streams video worth $1.65 B?
If so, why didn’t we think of that?

DLE

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3 responses to “You Tube-A Question of Valuation”

  1. Chelvalier Norwood Avatar
    Chelvalier Norwood

    I think that YouTube is worth $1.65 billion. The website is frequented by teenagers and young adults. Like you stated in class, we have disposal income and we are major consumers in the marketplace. I feel that YouTube is an excellent vehicle for advertisement. Tons of money is made in the advertising field and I feel that the cost would be recovered quickly. Matter of fact, I am a frequent visitor of the website and I always have a pleasant
    experience. One can find entertainment, music and video clips. Also, Google has the opportunity to evolve YouTube into a major website that relates to pop culture. I feel that it was a good investment!

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  2. Michelle Wågsjö Avatar
    Michelle Wågsjö

    How will Google’s competitors compete after such a high priced acquisition by Google? YouTube’s price, does it set the benchmark? Google seems to be inflating the value of the market. This can be good for other video streaming sites which now have increased chances of being purchased by some of Google’s rivals at a higher price than anticipated. Microsoft, I’ve read, is now working on its own type of YouTube called “Soapbox.” They claim to be creating this because it is more cost efficient than an acquisition.

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  3. Dennis Elam Avatar
    Dennis Elam

    Interesting, your observation also shows that MSFT is not the leader anymore, they will be coming with ZUNE to compete with iPOD, have fought SONY in the game market, and now are late on board with soapbox, I guess that is why MSFT is stuck at 25 bucks even though they still make lots of money. Clearly MSFT is not the present value of future profits or the market thinks future profits will be much lower.
    DLE

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