Google CEO Schmidt says they paid $1B premium for Youtube.
Since 2006, many observers have scratched their head over what prompted Google to pay $1.65 billion for the video site YouTube. We’re now a little closer to the answer.
The blockbuster acquisition for the 18-month-old start-up played a large role in sending valuations in the tech sector skyrocketing. Although YouTube made little revenue, the all-stock transaction gave Google control of a company many believed would change the face of mass entertainment. It also led to criticism from skeptics who thought that Google would never get its money back.
Google has revealed little about how it decided to pay $1.65 billion but CEO Eric Schmidt said under oath last spring that he was willing to pay a premium–a big one–for YouTube. Leading up to the acquisition, Schmidt told Google’s board of directors that his estimate of YouTube’s worth was somewhere between $600 million and $700 million, according to court records reviewed by CNET.
Schmidt had his reasons for asking his board to OK an offer of $1 billion more than what he thought the site was worth. The CEO made the comments during a deposition he gave in May as part of the copyright lawsuit Viacom filed against Google and YouTube in 2007. In short, he believed that Google had to offer that much, or competitors, presumably Microsoft or Yahoo, would walk away with the increasingly popular video site.
“This is a company with very little revenue,” Schmidt said while being questioned by Stuart Jay Baskin, a Viacom attorney. “(YouTube was) growing quickly with user adoption, growing much faster than Google Video, which was the product that Google had. And they had indicated to us that they would be sold, and we believed that there would be a competing offer–because of who Google was–paying much more than they were worth…We ultimately concluded that $1.65 billion included a premium for moving quickly and making sure that we could participate in the user success in YouTube.”
This tells you how badly Google wanted to make sure Youtube didn’t fall into Miscrosoft’s hands.