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
    Dan, 24 Aug 2006 @ 10:24am

    VC is the "culprit"

    You may want to keep in mind that venture capital and private equity groups are the fuel behind the buying. Yes, Sony bought Grouper, but it's the VC and private equity folks are who keep the prices high.

    This occurs primarily because (for VC especially) they are typically mandated to put their funds to work... even if they can't find a decent business model. Because who wants to give money to a VC firm and have it just sit in the bank?

    So what do these people do? They buy the company... hype it up, and look for a greater fool buyer. The dot.com days were the epitome of this thinking. It tailed off for a while, but I wonder if we may be swiging back around toward the good old days.

    (And I don't particularly mind, if we get another mini-mania, that means higher paychecks for IT workers :-)

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