So it’s official. Google has bought YouTube for $1.65bn.
And the question is–how much quicker is it getting to reach $1bn in value to a buyer?
Just looking at private Internet companies, it took Geocities several years before Yahoo acquired it for $1bn or so in 1999.
Skype was founded in 2002, launched a beta in Aug 2003 and was acquired by Ebay in September 2005, say at three years age for $2.6bn in cash and stock with a $1.5bn earn out. By employees, I think Skype had 200 odd at the time of acquisition.
YouTube was founded in Feb 2005, launched in Sep 2005 and a year later (or so) was acquired by Google for $1.65bn. YouTube’s initial investor was Sequioa, $3.5m in November 2005. By employees YouTube had 67 according to press releases.
Without knowing the details, I guess Sequoia is going to make upwards of $400m on the deal (assuming they hold a magical 25%–they may hold much more)–which isn’t bad for a year’s work. Bonus time in Sand Hill Road!
In other words, it’s getting quicker and quicker to get a billion. I heard Danny Rimer say this at an event a few weeks back referring to Skype. It seemed not implausible, but well, a stretch. He was right.
The magical combo of already having an audience online, having eliminated boring operational hassles like how do I scale past a million users, how much will my database licenses cost and so on, means you can test and prove a proposition really quickly. It’s something that ordinary firms (pre-Internet) struggle with.
But the deal raises all sorts of other interesting questions:
- Just how innovative is Google’s engineering talent? AdSense is powered by Oingo (an acquisition), Google Earth by Keyhole, Analytics by Urchin (all acquisitions). The same week Google “put a lid on new products“, we see an acquisition in favour of organic growth. (Clearly a sensible, non-dogmatic approach for the firm but puts into perspective their ability to regularly generate innovation and take it to market.)
- Upe joked if there were any news companies worth $1.65bn. Well there are but for a $6bn UK firm like ITV or newspaper groups in the US, finding $1.65bn to buy an early stage venture will be a real stretch.