Google / YouTube - Best M & A Ever?

Jul.19.09 | About: Alphabet Inc. (GOOG)

Back in Fall of 2007, I published something called Top 10 Best Web M&As of All Time. The YouTube acquisition had just closed, so I said we’ll reserve judgment. At the time, we put News Corp.’s (NASDAQ:NWSA) acquisition of MySpace at #1 for the simple reason that Google’s (NASDAQ:GOOG) $900M search deal made it a slam dunk for #1. On that note, today you can argue that MySpace is less sexy than it was then… but who cares, it’s still a very accretive deal for News Corp.

Today we hear mumblings that YouTube isn’t just generating $500M in revenues but will soon be profitable.

Over the years, has partnered with YouTube and we’ve learned a lot from them and given them earfulls frequently. I have argued that YouTube will be successful despite Google because Google is a tech company and YouTube needs more media and content savvy to become as successful as it possibly can.

But despite the criticism, it has always been clear despite what some analysts said, that YouTube was generating more revenue than some suspected and cost less than others feared.

But, the facts remain:

- YouTube is now the # 2 search destination after Google

- Market share-wise, YouTube is more dominating in video than Google is in search (or just as dominating).

- Online video will capture enough of the brand dollars in advertising that, when combined with YouTube’s dominance in video, will give Google a massive share of the ad dollars.

- All of Youtube’s original competitors (DailyMotion, Veoh, Revver, Metacafe, etc.) will have to totally change business models. You’ve seen it already with Veoh, and Revver has basically died and come back under a new leadership.

- YouTube’s new competitor, Hulu, is owned by media companies who will keep its success on a tight leash, because even if online ad revenues turn into quarters, they will still be smaller than the dollars from offline.

All in all you be the judge, but looking at the list of “top acquisitions” it is pretty sure than YouTube will be one of, if not the, best M&A deal online. Oh, one more thing, Google didn’t even pay cash, they used their $600-700 stock.