Google Is in Talks to Buy YouTube

The discussions are still at a sensitive stage and could well break off, says WSJ source
The discussions are still at a sensitive stage and could well break off, says WSJ source

By Kevin Delaney, Wall Street Journal Online

RISMEDIA, October 9, 2006?Google Inc. is in talks to acquire online video site YouTube Inc. for roughly $1.6 billion, according to a person familiar with the matter.

The discussions are still at a sensitive stage and could well break off, this person says. Rumors of such talks were reported earlier on the TechCrunch blog.

A spokeswoman for YouTube could not be reached for comment. A Google spokesman said, “We don’t comment on rumors and speculation.”

YouTube is a poster child for a new generation of startups, which is surging thanks to the growth in usage of the Internet and online advertising. Founded in February 2005 in a garage by three twenty something alums of eBay Inc.’s PayPal electronic-payment unit, YouTube quickly built a huge consumer following for videos online. Now users watch more that 100 million videos daily, and the site’s market share tops that of similar services from the likes of Google, according to some research firms.

Rumors circulated earlier this year that some major media companies expressed interest in buying closely-held YouTube. CEO Chad Hurley said at the time that the company was not for sale and an IPO in the future was a possibility.

YouTube has stood out from the growing corps of online video services for its simplicity. YouTube serves up videos from its Web site directly or from other sites where people insert them, generally not requiring users to download any special software. It also let consumers display its videos on other sites, such as blogs or personal pages on News Corp. popular MySpace social networking service.

Last month, the San Mateo, California, company announced a new system to give media companies more control over the video on the site and to address their fears that others will profit from consumers’ piracy of their content. Last month, Warner Music Group became the first entertainment company to embrace the system. The two companies have agreed that Warner Music will post its catalog of music videos on YouTube and collect an unspecified percentage of the revenue from advertising appearing alongside them.

Source: online.wsj.com online.wsj.com/home/us online.wsj.com.

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