A few days after rumors circulated about the pairing, Google Inc. last night announced plans to acquire YouTube Inc. in a stock-for-stock transaction worth a whopping $1.65 billion..
Of course, YouTube is the popular online video site that has garnered a lot of ink in recent months for its user-generated videos. While the company has garnered significant "brainshare" in the online video sharing space, YouTube remains a free service and is only starting to experiment with ways to integrate advertising to generate revenue, which has led some to question the billion-dollar-plus value of the deal.
But Google, which launched its own video service recently, believes buying YouTube will significantly bolster its effort to get into online video. While less than two years old, YouTube said that visitors come to its site to watch more than 70 million videos daily.
Google aims to retain as much of YouTube as possible following the close of the deal, which is expected in the fourth quarter. The company said YouTube will keep its name and its employees, which number 67. Google said it also expects to retain its own Google Video site, where folks can search for, watch and buy TV shows, movies, music videos, documentaries, personal productions and more.
According to a recent report by Parks Associates, the Internet is beginning to live up to its much-hyped ability to deliver new content to users, with a small but growing number of users now paying for these experiences. But household spending on this remains quite small. While revenue for DVD rentals and sales and movie theater receipts total $23 billion each year in the United States., annual revenue among all online rental or download-to-own sites is estimated to be no more than $50 million, said Kurt Scherf, vice president and principal analyst at Parks Associates.
Google Inc. www.google.com
