Google Inc. appears to be on the verge of buying YouTube Inc. for at least $1.6 billion in a deal that would catapult the Internet search leader to a leading role in the online video revolution. This is a very good move for Google strategically as it opens to them the possibility to grow in one Internet area where they were not very big — that is, video,”

WEB SEARCH leader Google Inc. said on Monday it agreed to acquire top video entertainment site YouTube Inc. for $1.65 billion in stock, the highest price yet paid for a consumer-generated media site. The first deal to value one of the new generation of user-participation Web sites at more than $1 billion combines two of the most popular Internet brands: Google, synonymous with Web search and rapid innovation, and You Tube, a Silicon Valley upstart that has spearheaded the video-sharing craze.

The acquisition combines one of the largest and fastest growing online video entertainment communities with Google’s expertise in organizing information and creating new models for advertising on the Internet. The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience.
“The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,” said Eric Schmidt, Chief Executive Officer of Google. “Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.”

You Tube, which grew in 19 months from a start-up in a garage to now serve up 100 million videos daily, has drawn scrutiny from major media companies for copyrighted television and music videos that users post without owner consent. While YouTube said on Monday it had signed a spate of distribution agreements with major record labels, some analysts caution Google could still be inviting lawsuits with this acquisition.

Nonetheless, in anticipation of the deal, investors pushed shares of Google up $8.50, or 2 per cent, on Nasdaq on Monday to a closing price of $429.00 a level not seen since late April. In extended hour’s trade, Google climbed to $431.55.
“YouTube is phenomenally valuable in terms of traffic and in the Internet sector this is important just like location is important in real estate,” Oppenheimer analyst Sasa Zorovic said of combining YouTube with Google’s advertising machinery. Analysts said the deal would thrust Google quickly into the emerging market for video advertising, where it has only a tiny foothold compared with Yahoo Inc. And start-ups. The all-stock deal, expected to close this quarter, was structured to make it tax-free for YouTube shareholders and cheaper for Google than paying cash, company officials said.

About YouTube
February 2005, YouTube is a consumer media company for people to watch and share original videos worldwide through a Web experience. YouTube allows people to easily upload and share video clips and across the Internet through websites, blogs, and e-mail. YouTube currently delivers more than 100 million video views every day with 65,000 new videos uploaded daily and it has quickly become the leading destination on the Internet for video entertainment.

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