GOOG-YouTube: Numbers Tell Different Stories; VCs Win

Lots of people chiming in about valuation and pricing where this deal is concerned. As soon as the number $1.6 billion was floated by Mike Arrington and picked up by others, it was clear if the deal went through Google would be paying a significantly higher amount than I’d ever heard seriously mentioned for YouTube. That’s because Google’s interests lie beyond a traffic boost or even video sharing. It’s seeking nothing less than world domination in video and that’s an expensive mission.
In return, YouTube gets to leave behind the endless drama of who will own it and acquires an owner sympatico to its own ideas on copyright, something a media company could not have been, and possibly on the cutting edge of video advertising, something YouTube needs solved. Not incidentally, its founders, investors and employees with options get $1.65 billion in Google shares; the number of shares is tied to Google’s share price in the days before the deal closes. After that, their fortunes will be tied to Google. When the share price rises, so will their paper worth. If the stock drops before they can sell, so does their net worth.
— FIM paid $580 million for MySpace and its parent company and was considered by many to have overpaid. FIM and Google made a $900 million ad deal and suddenly that value looked more justified. Google may be counting on that when it expects FIM to accept that it just acquired its nearest competitor in delivering videos.
What are others saying:
VC Ratings: “Sequoia Capital, which has invested $11.5 million for about 30% of YouTube, is doing really, really well. and may have finally usurped Kleiner Perkins Caufield & Byers as the top venture capital firm. … This is the clearest admission yet by Google that it’s maturing and it can’t build everything on the web itself.”
Jeff Clavier: “From a pure deal perspective, Sequoia Capital (which also backed YHOO and GOOG) adds another icon to the list of successful exits they have had. Their 30% investment in YouTube for $11.5M has turned into $500M in less than two years – a 43x multiple, or more if the GOOG stock gets a pop over the next 30 days.”
PEWeek: SF hedge fund Artis Capital Management was a co-investor in the $8 million spring second round this spring, according to a reg filing. With the total at $11.5, that means Sequoia’s win may be a bit lower than estimated. Stephen Welles, a lawyer with Wilson Sonsini Goodrich & Rosati, also participated, PEWeek reports. No details on amounts.
Update: Credit where credit is due … the digital ink on the press release was barely dry when we heard from an NYPost reporter wanting to know why we hadn’t already admitted we were wrong about his story from three weeks ago citing a “senior industry source” saying YouTube wouldn’t contemplate a sale for less than $1.5 billion. (He also wrote that YouTube said it was focused on “building a long-term viable company” and that top media execs weren’t close to hitting that price mark.) Google wasn’t suggested as a possible buyer. That’s where Arrington gets a nod, for adding some credence to the much-discussed idea that Google could be a buyer. He carefully estimated the report of talks and the details as “40% likely to be at least partially true” — putting the story in play.

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