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Google Pays $1.65 Billion for Popular Video Web Site YouTube

Google announced this week that it will pay $1.65 billion in stock for the popular video repository and search engine YouTube. Technology and financial analysts discuss the implications of the ground-breaking deal for the future of the Internet.

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    Less than two years ago, YouTube, a do-it-yourself Web site where users can post videos of just about anything, was a figment of the imaginations of two 20-somethings in Silicon Valley. Now, more than 100 million videos are watched every day on the Web site, everything from the ridiculous to the hilarious to the harrowing, soldiers posting videos of their tours in Iraq.

    YouTube has its own constellation of improbable homemade stars, like Geriatric1927, a 79-year-old British pensioner named Peter whose videos have been watched millions of times by a viewing audience many decades his junior.

    It's even become a passive player in the political season. Virginia Senator George Allen's now-infamous "macaca" episode first sped around the Internet on YouTube.

    SEN. GEORGE ALLEN (R), Virginia: This fellow here over here with the yellow shirt, Macaca, or whatever his name is…


    In a short time, YouTube has become a cultural phenomenon, and its success has had some of the Internet's biggest and wealthiest suitors in hot pursuit. Yesterday, Google won the race. YouTube's co-founders, Chad Hurley and Steve Chen, announced the deal — where else? — on their own YouTube video.

  • CHAD HURLEY, Co-Founder, YouTube:

    Hi, YouTube. This is Chad and Steve. We're the cofounders of the site, and we just wanted to say thank you. Today, we have some exciting news for you: We've been acquired by Google!


    Google, the dominant Internet search engine, will acquire YouTube for $1.6 billion in stock. Even though YouTube, with its millions of users, has not yet turned a profit, Google is gambling that YouTube is on the leading edge of a fundamental shift in viewing habits, from television to the Internet.

    But that bet comes with some big questions, including the legality of copyrighted material that regularly appears on YouTube's site and whether the quirky community that built YouTube will stick with it as it becomes inevitably more commercialized.

    And we look at all this now with Safa Rashtchy, who watches Internet media and marketing for the investment bank Piper Jaffray. For the record, Piper Jaffray has done work for Google and other tech companies.

    And Andreas Kluth, technology correspondent for the Economist magazine. His special report on new media called "Among the Audience" appeared in the magazine earlier this year.