Friday, October 06, 2006

Gootube?

So the Wall Street Journal piece today saying that Google is in talks to buy You Tube has understandably got quite a lot fo attention. A few things pop out here. First if You Tube does sell then Google really is the most logical buyer. Google's cutlure and business model is ideal. The other potential suitors seem less of a fit andf have already put forward alternatives. I'm referring to the likes of Microsoft and Yahoo!. I guess the question is will they sell? If you were a founder would you cash in now? The same questions were clearly in the minds of the Skype guys. In their case eBay paid $2.3Bn for the business. At that price I think it was likely an easy decision. You Tube is apparently being offered $1.6Bn. This seems relatively cheap to me (the emphasis being on the word 'relatively'). Truth is the numbers at this level are not tied to sales or profits they are tied to 'how much can you justify to investors.' It is very clear that You Tube is a high growth company in a high growth area. On that score if this deal were to open up a rapidly growing $10Bn market for Google then a price of between one and two billion dollars doesn't sound that bad. Does it?