Grouper Buy Sends YouTube Billion-Dollar Buyout Plan Into Overdrive

from the fishing-for-dollars dept

YouTube has already been through one round of the Skype Billion-Dollar Plan, which didn't quite work as the company's CEO talked its takeout price down to $600 million. But it's been resurrected for a second go-round, after Sony yesterday it announced it was buying online video site Grouper for $65 million. Grouper didn't have too many users -- less than 1% market share, according to some figures -- which means YouTube must be worth $1 billion. Wait, make that $2 billion. Some people say this isn't accurate because of the copyright problems a media-company buyout of YouTube could likely bring, but that's a small nit to pick when there's the more fundamental issue that you're talking about billions of dollars for a site that's only just started its attempts to monetize its traffic. But basing a YouTube valuation on the Grouper deal is way off-base: Grouper wasn't bought for its miniscule traffic, but for its technology (as TechCrunch points out after dropping that $2 billion number), which Sony could ostensibly use to distribute content online. While YouTube's attracted a lot of traffic, and offers a cool service, its technology isn't particularly noteworthy, as is evident from the spate of copycats it's spawned. Basing a YouTube valuation on the sale of a fairly fundamentally different company isn't accurate; but somehow it's hard to believe that will matter when YouTube goes to cash that seemingly inevitable big check.
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  1. identicon
    Vasco DaGameboy, 24 Aug 2006 @ 9:45am

    I'm amazed

    I understand these non-technical money guys thinking that these brands are worth a billion, but it continues to amaze me that people who have some tech savvy buy into these ridiculous valuations. YouTube is king of the video pile ATM, but there are several serious competitors, not the least of which is Google video, that could easily take a chunk of its market share (or, shall we say, viewer traffic, since YouTube isn't quite a huge cash generator just yet) with a few changes.

    Also, there are so many horror stories about huge white elephant purchases (business.com, anyone?) that you would think money men would have learned to look at old, fuddy-duddy measures such as P&L rather than some phantom number of hits.

    Oh, and weren't we having this same argument about Digg just a week or so ago?

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