By Andrew Ross     Sorkin and Jeremy W. Peters
Oct. 9, 2006

Google introduced this afternoon that it might buy YouTube, the famous video-sharing Web website online, for stock that it valued at $1.65 billion.

Google beat out a number of different YouTube suitors, which includes Microsoft, Viacom, Yahoo and the News Corporation. By successfully negotiating the deal, Google has another time proved that it’s far the Internet’s dominant player.

Under the phrases of the deal, YouTube will maintain lots of its identification and will maintain its call and its office in San Bruno, Calif., greater than 25 miles from Google’s headquarters in Mountain View.

Chad Hurley, YouTube’s co-founder and leader govt, has repeatedly said he could prefer for his business enterprise to stay unbiased. Asked about such remarks in a conference name with Wall Street analysts and buyers held past due this afternoon, Mr. Hurley said his employer did want to live impartial, adding that “through running with Google, that’s nonetheless the case.”


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Steve Chen, additionally a YouTube co-founder, said, “It is tough for me to imagine a better suit for two organizations,” both in phrases of era and corporation subculture.

The rise of YouTube has been meteoric. The Internet start-up has been in operation for much less than a 12 months, but it already has an expected 50 million customers global.

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The acquisition of the privately held YouTube will allow Google to thrive in a single vicinity of the Internet in which it has so far didn’t advantage footing. According to Hitwise, which monitors Web site visitors, has the lion’s share of on-line video visitors. YouTube has a 46 percentage proportion, MySpace has 23 percentage and Google Video has 10 percent.

The deal can even substantially benefit YouTube, which would have Google’s huge resources to assist it navigate a few sticky criminal troubles. Copyrighted movies often discover their way onto YouTube’s pages in spite of efforts with the aid of the web page to save you it. YouTube may also benefit from a Google alliance as it attempts to expand new software program to prevent copyright infringement.

These copyright issues have led a few in the era enterprise to evaluate YouTube to Napster, the music file-sharing provider that sooner or later needed to close down after an extended criminal combat with the recording industry.

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Earlier today, YouTube signed 3 separate offers that should provide a few prison safety from copyright infringement claims. One of the offers will permit YouTube to broadcast CBS programming. In addition, YouTube reached agreements with the Universal Music Group and Sony BMG Music Entertainment on the way to permit it to broadcast music videos.

YouTube, Google and Napster all proportion one not unusual thread: a bootstraps success tale of younger era buffs who commenced with nothing. Mr. Hurley and Mr. Chen commenced YouTube after the two struggled to proportion motion pictures of a night meal in January 2005. Still of their 20’s and working from a storage, the two secured $3.5 million in capital from Sequoia Capital, the equal company that helped finance Google when it turned into nevertheless a fledgling business enterprise, in addition to different Silicon Valley stars like Apple, Cisco, Oracle and Yahoo.

The YouTube deal represents a substantial payday for Sequoia Capital, one of Silicon Valley’s most a success assignment capital companies. Sequoia invested a complete of $11.Five million in separate rounds and became the only challenge company to make investments in the business enterprise.

Sequoia’s stake in YouTube has been estimated at about 30 percent, this means that it might be well worth about $495 million based totally on the purchase fee.

Experts say Sequoia’s cross-it-alone investment in YouTube represents the kind of aggressive circulate for which Sequoia is known. A greater ordinary, and safer, method would have been to herald different traders, especially for an early stage funding in a agency vulnerable to becoming the target of highly-priced proceedings.

“They had an absurdly excessive degree of self assurance with what they have been doing,” said Paul Kedrosky, a project capitalist and author of the blog Infectious Greed.

The truth that a Sequoia partner, Michael Moritz, sits on the board of Google, whilst his colleague, Roelof Botha, led the investment in YouTube, could have given Google more insights, and therefore, more self assurance, into the criminal risks related to YouTube, Mr. Kedrosky stated.


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Google has experienced explosive growth in current years, and inside the beyond years the cost of its inventory has greater than quadrupled. Today, Google’s shares won $8.50, or 2 percent, to close at $429 following information reviews approximately a cope with YouTube. The deal become introduced after the inventory marketplace closed.

Google’s maximum recent income document confirmed that the organisation’s 2d-sector income greater than doubled from a year earlier. Its worker base has grown through about a fifth all through the first half of of the year.

Miguel Helft and Peter Edmonston contributed reporting for this tale.


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