October 9th, 2006
Google and YouTube: Pig in a poke?
In yet another example of absurd valuations, Google ponied up $1.65 billion today for YouTube. Co-founders Chad Hurley and Steve Chen were understandably excited. "We now have the resources to take our service to the next level," said Chen, who serves as YouTube's chief technology officer. The "next level", apparently, being somewhere in the vicinity of Pluto.
YouTube was founded on Valentine's day last year by Hurley, Chen, and Jawed Karim. Karim left the company earlier to pursue a degree at Stanford (doh!). Sequoia Capital had invested $11.5 million in the fledgling company over the past year to help pay for staff and infrastructure.
Let's put this in terms ordinary people like us can understand. Say you and two friends pool together 50 bucks and some change to buy a fuzzy Elvis painting at a garage sale. Twenty months later you take it to one of those PBS roadshows and find out it's really worth over $7,000! Amazing!
Google belatedly tried to launch their own video service, but apparently it wasn't growing fast enough for them and they didn't want to be left behind. At least they paid for it all in stock. Risks to this venture are numerous, especially now that the company can actually afford to pay for all those copyright lawsuits. Chad and Steve: if you're reading this, consider the example of Netscape and AOL. Cash out some of that funny money while you can.
Ed Burnette is a professional developer and author of several articles and books about computing including Hello, Android: Introducing Google's Mobile Development Platform, 2nd Edition. For disclosure of Ed's industry affiliations, click here or to view his full profile click here.
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