Did Google Overpay for YouTube?

In November 2006, Google (GOOG) bought privately held YouTube for $1.65 billion in stock. (Details at How Much Did Google Pay For YouTube Video and When?)

Word is out that Google will retire "AdSense video units" at the end of April because

we've found that it hasn't been performing as well as we had hoped, so we've decided to focus our efforts on other opportunities to help publishers monetize their sites

That is code for "we have yet to figure out how to make money with our $1.65B investment in YouTube. We should have bought US Treasury notes with the money."

Does anyone think Google overpaid for YouTube or is there a way for them to get a return on their investment?

Comments

[LA Tech:]

Google didn't overpay for YouTube. Google's incompetent marketing squad is what it is and that is to say terrible.

Look at all the various projects, er products, that Google has destroyed after either purchasing or developing in house because of terrible marketing:

-Postini
-GoogleApps (paid version)
-YouTube

Google knows paid search and completely dominates that arena and will for many years.

Everything else, Google is very average to very poor in executing their business plan, what ever that plan is!

Apr 21 09:59 AM

[Kirk Lindstrom:]

"Google makes so much money the $1.65 billion is trivial."

No offense, but that is hyperbole at best. Google's GAAP EPS for Q1-09 was $1.64B vs. $1.62B a year ago

Would you consider your spending your salary for three months on a single item "trivial?"

To me, the value of YouTube is I can embed videos on my blog to attract readers who MIGHT click on an ad. This is not a big income stream for investment related blogs....

Before Google bought YouTube, did you have the ability to embed the videos on Google blogs? It might have been a better idea to offer $10M a year to the founders of YouTube for 10 years to get EXCLUSIVE rights to embedding the videos and let the founders deal with all the copyright issues plus preventing non Google AdSense sites from using the videos.

I really don't know which is why I asked. Despite your hyperbole, they paid a significant chunk of change that has not earned much money for them UNLESS there was no way to embed the videos unless they bought the company. That would make it worth buying, but then why not make it exclusive to sites that display AdSense?

Apr 21 04:15 PM

[William Cowie:]

LA Tech got it right. Google has yet to demonstrate its acumen in anything but search. Simpler to just pay a dividend. But I know, donkeys will fly before Google ever cares about stockholders...

Apr 21 08:14 PM