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Google’s YouTube Blunder, Reply to Comments… October 17, 2006

Posted by Bill in Uncategorized.

In the immortal words of Groucho Marx… “Whatever it is, I’m against it!”
(Main line in his first musical number in Horse Feathers, 1932).

As the author of the article, Google’s YouTube Blunder, I recognize this piece is contrarian and I have received many passionate responses– nearly all of the messages I received to my email were positive. The comments in this blog range from “spot on” to “you’re out of your league, rookie”… all of which I very much appreciate. The art of discussion, differing opinions, taking a POV are very much lost these days and I love to see it.

To add light to the Marx quote above… YouTube, MySpace, Facebook, [insert the next 50] were all created from 3 things:
1. Easy to use
2. Amazingly viral
3. Anti-establishment

The minute a “GooTube” user types in an artist’s name and gets redirected from the video that is currently there to the copyrighted video, or when the user needs to sit through a 10 second commerical before seeing the video, they will lose both #2 and #3. It is cool to be different right now. The minute facebook added some trasparency to their groups and added more advertising, there were petitions around campuses to ban them.

If I were running Google, would I have done this acquisition? As a public company, hell yeah… I HAVE TO. Boutique acquisitions are for future product lines, revenue streams, R&D. Big acquisitions that aggregate billions of impressions, and only cost me less than 1% of my market cap is a bet I would probably make… rational? I think not… To go through the math of what earnings need to be ar the 60x EBITDA multiple to justify the purchase price… okay, see where you are going and I did the same math myself ( I was a finance guy before becoming an online marketing executive). However, GOOG is trading at 60x only because of their growth rate, not because that is what they are worth today. In a rational market, once that revenue growth rate slows, valuation should come down to realistic levels.

Anyway, its been fun. Thanks for all the comments– both positive and negative– all very much appreciated.


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