Google and YouTube: Pig in a poke?

Google and YouTube: Pig in a poke?

Summary: In yet another example of absurd valuations, Google ponied up $1.65 billion in stock today for YouTube. Co-founders Chad Hurley and Steve Chen were understandably excited. My advice: cash out some of that funny money while you can.

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In yet another example of absurd valuations, Google ponied up $1.65 billion today for YouTube. Co-founders Chad Hurley and Steve Chen were understandably excited. "We now have the resources to take our service to the next level," said Chen, who serves as YouTube's chief technology officer. The "next level", apparently, being somewhere in the vicinity of Pluto.

YouTube was founded on Valentine's day last year by Hurley, Chen, and Jawed Karim. Karim left the company earlier to pursue a degree at Stanford (doh!). Sequoia Capital had invested $11.5 million in the fledgling company over the past year to help pay for staff and infrastructure.

Let's put this in terms ordinary people like us can understand. Say you and two friends pool together 50 bucks and some change to buy a fuzzy Elvis painting at a garage sale. Twenty months later you take it to one of those PBS roadshows and find out it's really worth over $7,000! Amazing!

Google belatedly tried to launch their own video service, but apparently it wasn't growing fast enough for them and they didn't want to be left behind. At least they paid for it all in stock. Risks to this venture are numerous, especially now that the company can actually afford to pay for all those copyright lawsuits. Chad and Steve: if you're reading this, consider the example of Netscape and AOL. Cash out some of that funny money while you can.

Topic: Social Enterprise

Ed Burnette

About Ed Burnette

Ed Burnette is a software industry veteran with more than 25 years of experience as a programmer, author, and speaker. He has written numerous technical articles and books, most recently "Hello, Android: Introducing Google's Mobile Development Platform" from the Pragmatic Programmers.

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3 comments
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  • Google just have too much money

    They have about 4bn $$$ in cash/stock and they are looking for creative ways to spend it. They can't just go to the bank with it, that would be boring :)

    I'm not sure how much revenue they can expect from advertising, but i think it will take many years until they return their investment.
    genadyb
    • They have less now...

      ... and after the lawyers sue for copyright violation there will be even less.

      That should solve your problem.
      bportlock
  • Just goes to show that Google is over valued

    The Google management consider the Google stock over valued, hence an over valued princely sum for YouTube.

    If you think YouTube is worth $200 million, then you know that the Google management values the Google stock at 400 * ( 200/1650) = $48.

    If you think YouTube is worth less than $200 million, yikes whats Google stock self valued at
    zzz1234567890