When Did Google Buy YouTube, Why and for How Much

when did google buy youtube

The story of Google and YouTube is an interesting one. If you are like me, it is possible that you have searched for something on either of the platforms today. What you might not know is that Google and YouTube belong to the same parent company, Alphabet. It was not like this from the start. So, when did Google buy YouTube?

That might be what you are wondering. It is something that bothered me too, and I wanted to understand how and when Google bought YouTube.

Google was the first to be launched. It was founded in September, 1998 by Larry Page and Sergey Brin. They started Google while they were Ph.D students at Stanford University in California, United States of America.

It is interesting that these days; millions of people across the word consider Google or YouTube as their main source of information. It is also a platform where you can get tutorials or how-to kind of information.

When did Google buy YouTube?

2006 is the year that Google bought YouTube for $1.65 billion in stocks.

At the time, the price of this acquisition seemed high, but with the growth of YouTube, it has turned out to have been a very good business investment.

The announcement of the purchase was made on October 9, 2006 and completed on November 13, 2006.

In business, it is important to look out for opportunities that can help you grow your business.

The deal that saw Google buy YouTube is an example of how an acquisition can help a business to grow.

Today, Google is the number one search engine in the world. YouTube is the second largest search engine.

As you can see, the purchase of YouTube by Google has helped it to dominate the world of internet searches.

Who owned YouTube before Google?

Like I mentioned earlier, Google was started in 1998. On the other hand, YouTube was started on the 14th September, 2005 at San Mateo in California, United States.

That was about seven years after Google was founded.

It is interesting that both companies were founded in California. You might even be tempted to think there is a link between their successes today and California.

That is something worth researching on. What do you think?

Before YouTube was bought by Google, it was owned by three founders who were; Chad Hurley, Steve Chen and Jawed Karim.

The three gentlemen were former employees of the online payment giant Paypal

How Much Google Paid to Buy YouTube

Back in 2006, Google bought YouTube for $1.65 billion.

That figure seems quaint now but at the time it was an eye-popping figure to pay for a start up only a year and a half old.

Some financial analysts and competitors said Google overpaid. Mark Cuban said the search giant was “crazy” to take on YouTube’s many legal liabilities.

Google itself later acknowledged that YouTube was not worth anywhere near the price tag at the time of the acquisition.

Almost two decades later, though, the YouTube buy is widely considered to be one of the best consumer tech acquisitions ever. But is it the best acquisition of all time?

There is certainly an argument for a couple of tiny investments that paid off incredibly, like Yahoo scooping up Flickr and Google’s $50 million acquisition of Android in 2005.

The difference is that at that time, no one outside Silicon Valley knew what Android was.

YouTube was already world famous when Google snapped it up, and its price tag was ridiculous by conventional standards.

It was one of the first wild bets a tech giant made following the dot-com crash, and for the following reasons, I’m willing to defend it as the best one.

Did the Google purchase of YouTube eliminate competition?

It did. In 2005 the web was in desperate need of a video hub, and Google tried to create one with the poorly named Google Videos.

But the site failed to catch on as quickly as YouTube, which had more social features and extremely popular pirated TV clips.

At the time of its acquisition, YouTube was one of the world’s fastest-growing websites, and its executives had a clear understanding of what users wanted out of a video site. As the adage goes: If you can’t beat them, buy them.

Did Google buying YouTube improve business?

Yes. Google cares about selling ads, and it especially cares about selling ads against search results.

YouTube has evolved into the world’s biggest video search engine, with a sprawling database of clips made navigable by Google’s smart algorithms.

Google can sell display and video ads against all these clips, to the tune of more than $14 billion in estimated revenue this year as they reported.

It helps that search results from the main Google search engine are often filled with YouTube clips.

Google loves when search queries drive people to other Google services, and YouTube is a big part of that strategy.

When did Google buy YouTube and How Google benefits from buying YouTube

YouTube has revealed its advertising revenue surpassed $15 billion in 2019 which is nine times more than Google paid for the video-sharing website 14 years ago.

Alphabet, Google’s parent company, broke out the long-awaited revenue numbers for YouTube for the first time ever on Monday in its earnings report on the 2019 fiscal year . Ads on the video site now comprise about 9% of Alphabet’s overall revenue, which totaled $162 billion last year.

The breakout for YouTube’s numbers marks the end of a long period of silence: It’s the first time Google has reported these figures since the YouTube acquisition closed in 2006. Alphabet similarly reported Google Cloud revenues for the first time, which came out to about $2.6 billion in the quarter.

Alphabet CFO Ruth Porat said in a press release around the earnings report that the reason for the sudden disclosure is to “to provide further insight into our business and the opportunities ahead.” The disclosures also came as Alphabet’s overall quarterly revenue fell short of Wall Street expectations .

Those revenue figures don’t tell the entire story, however Porat said on a post-earnings conference call with Wall Street analysts that “most” of that revenue goes to YouTube’s roster of creators, making it hard to estimate how much of it flows back to the company as profit. Regardless, however, the figure highlights the exponential growth of the video platform in just 15 years of existence .

Growth of YouTube

YouTube has grown to become one of the most popular sites for creating and sharing videos on the internet. The platform now has more than 2 billion monthly users visiting the video-sharing platform. They watch over 250 million hours each day of their favorite vlogs, music videos, sports highlights, and more.

Google bought YouTube in October 2006 when the platform had only 65 employees. At the time, YouTube was still in its infancy: three early employees at PayPal had launched it a year-and-half earlier out of an office above a California pizzeria.

The acquisition of YouTube was spearheaded by early Google employee Susan Wojcicki now the CEO of YouTube. Wojcicki has credited a video of two boys lip-syncing to the Backstreet Boys with convincing her that it would be worth it for Google to invest in user-generated content by purchasing YouTube.

Wojcicki successfully pleaded the potential of YouTube to Google’s co-founders, Larry Page and Sergey Brin, who then offered $1.65 billion to buy the site. Eric Schmidt, the CEO of Google at the time, called YouTube “the next step in the evolution of the Internet.”

Reasons Why Google Acquired YouTube

Google bought YouTube in 2006. A lot of people and especially business analysts did not understand the rationale behind the purchase.

One of the key reasons why Google acquired YouTube was to get into the business of video sharing.

This is an idea the company had tried and tested with Google Videos, and it had failed.

It was therefore an easy choice for the company to purchase YouTube which at the time was doing a very good job at video sharing.

Today, video marketing is a big thing, and with the power of YouTube search engines, Google is able to monetize the video content to generate additional income to the business.

That is why you find display ads showing when you watch videos on YouTube.

Other reasons why Google purchased YouTube for $1.65 billion in 2006 include;

  1. Popularity of YouTube

In 2006, YouTube was the 10th most popular online destination according to Alexa.

If you did ot trust Alexa at the time, YouTube was also ranked as the third most popular streaming video site by ComScore Media Metrix, and number one visited online video site by Hitwise.

Google Video was nowhere near the top of the online video sites.

The popularity of YouTube made it easy for Google to make the purchase.

If you ask me, that was a good strategic acquisition. Time has truly shown it was a good deal.

This is how statistics looked then:

  • YouTube: 45.46%
  • MySpace Videos: 22.99%
  • Google Videos: 10.25%
  • Yahoo! Video: 6.06%
  • MSN Video: 5.92%

Things have really changed from back in the days. Today, some of the above companies are a shell of their former selves.

  1. Avoiding to Repeat Mistakes

From the above statistics, you have noted that MySpace Videos had 22.99% market share.

What is very interesting is that Google had a chance to buy MySpace, but they did not.

Instead, it was Rupert Murdoch’s News Corp’s Fox Interactive that bought MySpace for a bargain price of $580 million.

It is therefore argued that Google purchased YouTube as a fall back for losing out to News Corp. Also, it is possible that Google did not want to make another mistake of refusing to buy a video site.

The fact that Google has also sunk about $600 million into an advertising deal with MySpace made YouTube a good idea.

The idea for Google was that it would own all the traffic generated by YouTube.

  1. Building a Community

YouTube enjoys a much more active, enthusiastic and loyal following than any video service which has been launched by a search engine company.

More people are creating YouTube channels and uploading content. You can check and click here  to subscribe to my YouTube channel.

With 35 million users in the United States alone, YouTube has proven that the success of online video is based upon sharing, commenting, ranking, embedding and suggestions, or in other words, having a community.

YouTube users are using the interface to share, upload and comment on videos. Not just watch them. That’s the difference between users and community, and YouTube has community.

  1. Usability and Stickiness

One other reason why Google purchased YouTube is related to usability and stickness of YouTube videos.

People stick around and watch more content on YouTube.

Google Videos did not have that ‘stickness’ and people were not staying for long to watch.

  1. Advertising and Money

The real intention of Google buying YouTube turned out to be commercial. It was all about advertising revenue.

Google was already running an advertising program for the written content. The idea for Google Video was to build it and later introduce advertising model in the videos.

It therefore made more sense for Google to buy YouTube, since the platform was already popular and turn it into a profit centre.

Over years, this model has worked and YouTube is not generating over $14 billion for the group.

What was the strategic rationale for Google acquiring YouTube?

Strategically, YouTube needed the merger because it needed money; for continuing operations, for growth and for its legal issues.

For Google, there are a number of potential reasons for the merger as discussed above.

What was the reason YouTube was created?

What was the original purpose of YouTube?

YouTube was originally created as a platform for anyone to post any video content they desired.

It was hoped that users could use the site to upload, share, and view content without restriction.

Conclusion

In conclusion, I hope you are now well in a better position to answer the question; when did Google buy YouTube?

As I mentioned earlier, Google purchased YouTube in 2006 for $1.65 billion in stock.

Over time, this particular acquisition by Google has turned out to be a very good deal for the company. YouTube is now the second largest search engine on the planet.

It is expected to grow as more people start using internet. Also, video is becoming a great platform for business, information and education.

Google will continue to generate revenues from partnering with content creators through advertising.

Video marketing is a powerful tool and I have written how or why you should consider it for your business. Check the resource below.