Google buys YouTube to become global media giant

The clouds of speculations over the much anticipated Google’s deal to acquire video-sharing website YouTube got dissevered on Monday, when the web search giant announced a $US1.65 billion stock deal to buy hot young video-sharing website.

This is the first time that a new crop of user-participation website is valued at more than $US1 billion. The Oct. 9 deal would combine two of the most popular internet brands-Google, synonymous with online search and rapid innovation, and YouTube, a Silicon Valley upstart that has proved itself as a leading force in triggering video-sharing craze.

After the acquisition deal announcement, Eric Schmidt, Google chief executive said, "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."

Emphasizing on their association with YouTube to compete in the online video services market, he said, "Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers."

Founded in February 2005 by three early employees of PayPal, the San Mateo-based service, YouTube has become one of the most visited sites on the web in just a year and a half. Nearly 2 months ago, in an announcement the company claimed that 100 million clips are viewed daily on YouTube, which features content provided by users, with an additional 65,000 new videos uploaded per 24 hours. According to an estimate the site has almost 20 million visitors each month.

Google executives assert that the deal would help transform their company into a global media powerhouse and provide new audiences for the targeted advertising, that's the major source of Google's earnings.

"Video is a great medium for advertising and from that point of view we are really excited about YouTube," Google co-founder and chief technology officer Sergey Brin said. "It is hard for me to imagine a better fit for a company."

Google intends to keep the company as an independent service to be operated from its headquarters in San Bruno, California, while continuing to cultivate its existing video service. All of YouTube's 65 employees were to remain with the company, Google said.

Overwhelmed with the acquisition deal, YouTube co-founder Chad Hurley, said, “By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners.”

Just hours before its association with Google, YouTube has announced deals to license content from two major record companies, Vivendi's Universal Music Group and Sony BMG Music Entertainment. Under this deal, the entertainment companies will permit the website post music videos and content from users that include copyrighted stuff in exchange for sharing ad revenue.

At the same time, Google has also entered into licensing agreements with Warner Music Group Corp and Sony BMG for its own video-sharing site dubbed, Google Video.

YouTube, the most popular free video hosting Web site that allows users to upload, view, and share video clips had been under pressure to avoid a copyright violation combat with the entertainment industry while it was in talks with Web search titan.

After some spectacular deals between the search engine giant, YouTube and entertainment majors, the analysts hope that the infringement would definitely slide down. "The cloud that was hanging over YouTube was really the cloud of piracy charges," said Rob Enderle, an analyst for the Enderle Group. "Having these licensing deals at least lowers substantially the downside risk."