Google buys You Tube for $1.65 billion

By: Shahla_Walayat

Google is buying the YouTube for $1.65 billion dollars in stock.

The deal that unites the most popular Internet search engine with one of the Web's rising stars is by far Google's most expensive in its eight-year history. But the price tag catapults Google into a front-running role with Internet video.

You Tube started in Feb 2005, and in just over 18 months has captured about 50% of the online video market, compared to Google's 11%.

The acquisition of YouTube gives Google a greater ability to capture more of the online video and social networking advertising market. Buying YouTube may also give Google a competitive edge against other social networking sites such as MySpace, which owns about 20% of the video-sharing market.

Google plans to introduce revenue sharing to encourage content creation and generate advertising revenue from the you Tube site. With YouTube's traffic and buzz, Google could quickly try to build its position as the video advertising clearinghouse online.

The number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition. Both companies have approved the transaction, which is subject to customary closing conditions and is expected to close in the fourth quarter of 2006.

The all-stock deal was completed as such so that the acquisition would be tax free for the YouTube shareholders, according to Google vice president and counsel David Drummond.

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