Google reportedly in talks to buy YouTube for $1.6b
Purchase could give Google 2d-largest Web presence
SAN FRANCISCO -- A purchase by Google Inc. of YouTube Inc. would give the most-used Internet search engine a website of video clips that is visited by more than 34 million Americans each month.
YouTube, started 20 months ago, attracts users that download more than 100 million video snippets each day, most of them homemade. Google, based in Mountain View, Calif., is in talks to buy the company for $1.6 billion, people involved in the negotiations told The New York Times and Wall Street Journal yesterday.
Google's pursuit of YouTube underscores the race by established Internet companies to keep pace with the surging popularity of new sites. Google's video site has less than half the users of YouTube, according to Nielsen/NetRatings. YouTube, friend-finder page Facebook.com, and news site Digg.com are among operators winning millions of viewers each month.
``They are buying audience," said Charlene Li, an analyst at Forrester Research in San Francisco. ``It totally makes sense. The biggest problem Google Video has had is that they started with a business plan, not a user model."
Google spokesman David Krane said the company doesn't comment on ``rumor and speculation." YouTube, based in San Mateo, Calif., also declined to comment .
A purchase of YouTube might promote Google to the second most-popular US website from third place. The two brands combined would have about 101 million visitors a month, based on August figures, according to Nielsen. Yahoo had 106.7 million and Microsoft Corp.'s MSN had 98.5 million.
Features that allow people to easily upload and share clips have spurred YouTube's popularity. The site also lets users rate and classify videos, a task that is a challenge for Google's Web search engine. Google also offers a video sharing site that lets people upload their own clips.
Shares of Google rose $8.69 to $420.50 in Nasdaq Stock Market composite trading. They have risen 1.4 percent this year.
A purchase of YouTube might be Google's largest acquisition. Google has bought a clutch of small start-ups including mapping-software maker Keyhole Corp. in 2004 and Upstartle, creator of a Web-based word processor, in March. Google had $9.82 billion in cash and marketable securities as of June 30 and generated sales of $6.14 billion in 2005.
Buying YouTube would follow Google's strategy of tapping more content to show ads against. In December, it agreed to buy a 5 percent stake in Time Warner Inc.'s AOL to show ads on AOL's sites. News Corp.'s MySpace.com forged an agreement with Google in August that will generate at least $900 million in sales over three years.
A sale for $1.6 billion would be a windfall for Sequoia Capital, which invested $11.5 million in YouTube since November, according to YouTube's website. Menlo Park, Calif.-based Sequoia also invested in Google and Yahoo, owner of the second-most-used search engine.
