Google acquires YouTube

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Mountain View, Calif.—Google announced Monday it has agreed to acquire online video destination YouTube for $1.65 billion in a stock-for-stock transaction.

Following the acquisition, YouTube—which was launched in February 2005 and has 21 million U.S. users, according to comScore—will operate independently to preserve its brand and “passionate community,” the search giant said.

According to Hitwise, the acquisition gives Google/YouTube a combined 60% market share of the video advertising market.

One analyst applauded the move.

“In our view, YouTube, a neutral video network, is in better hands with Google than with a big media company (difficult to sign content deals) or another Internet media company (less traffic monetization), so Google was in a position to be the highest bidder,” said Justin Post, research analyst for Merrill Lynch, in the company’s deal analysis report.

“[The] acquisition will put the MSN and Yahoo! ad networks behind Google in video,” he added. Post also noted that the “acquisition is Google’s largest and first major acquisition primarily for traffic.”

—Carol Krol

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