Monday, October 09, 2006
As rumored, Google did agree to acquire Youtube for $1.65 Bbbillion in stock.
This Info Week article provides a helpful overview of the sky-is-falling analyses of "doomedTube".
Hey, Mark Cuban: copyright law is granular here, it seems to me. If Google puts together a responsible set of editorial and technical solutions to prevent copyright-infringing content from going on there, then any litigation must be between the violator and the litigant. Obviously, companies can sue Google if they wish, but everything Google builds is a "platform," and so far, in the United States, they haven't been crippled by copyright lawsuits. Rather, they've been challenged and sued repeatedly but have fought back and defended their take on fair use, while preparing to comply with legal directives that might require editorial, policy, and technological tweaks. This has happened with Search, Book Search, Video, News, AdWords, and a few other Google projects/platforms.
Similar to how it's playing out with the AdWords platform, with Google Video or its cousin Youtube, the onus is on Google to build a reasonably responsible platform, and to police it reasonably. And to stand down when it feels like it's probably going to be better off not fighting a particular case. And/or to form legal agreements with copyright owners. It's messy and it's ongoing, but it's not black or white.
So: in my opinion, even in the worst-case scenario, a bunch of the current content gets pulled off there, leaving a remnant that is still quite popular and growing. Meanwhile Google has to expect steady growth in voluntarily uploaded individual content, and commercial stuff that gets distributed through a license. That's not so far different from early experiences by previous operators in similar spaces: Flickr, Singingfish, etc. It is different from services that were and are 100% dedicated to piracy, such as Napster and its current equivalents.
The biggest risk here is not litigation, doing the wrong thing, offending folks, etc. The biggest risk is failing to achieve scale and leadership and becoming irrelevant and ignored.
Google, World's Largest VC, is betting that even the most crippled version of Youtube will wind up being worth more than $1.65 billion. That's a carefully-hedged bet. Essentially, they've used their imagination on both the low and high ends, and purchased a "30% stake" of today's Youtube in the hopes that it's really a "60% stake" of something much larger. (Meaning: even if 70% of the content gets wiped off next year, they'll have achieved their worst-case scenario. Meaning that Google probably values Youtube at a closer-to-$5-billion valuation, and has argued strenuously for the "potential-litigation-discount," so they're actually thanking Cuban for his money-saving analysis.)
Doing this with Google stock just complicates the math a bit more for those of you scoring at home.
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