Google paid $1 billion premium for YouTube

Wanted it, wanted it bad

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7 October 2009 2:36 GMT / By Stuart Miles

Google's CEO Eric Schmidt has admitted to paying a $1 billion premium on YouTube when Google bought the video service in 2007.

The move, which made sure that the fledgling company (at the time) didn't fall into the wrong hands (read Microsoft or Yahoo) has been uncovered following a request for court papers of the 2007 court case against Viacom over copyright material on YouTube.

"Leading up to the acquisition, Schmidt told Google's board of directors that his estimate of YouTube's worth was somewhere between $600 million and $700 million", reports CNET after seeing court records.

The court papers go on to reveal a fuller explanation from Schmidt to Stuart Jay Baskin, a Viacom attorney.

"This is a company with very little revenue, growing quickly with user adoption, growing much faster than Google Video, which was the product that Google had. And they had indicated to us that they would be sold, and we believed that there would be a competing offer--because of who Google was--paying much more than they were worth. In the deal dynamics, the price, remember, is not set by my judgement or by financial model or discounted cash flow. It's set by what people are willing to pay. And we ultimately concluded that $1.65 billion included a premium for moving quickly and making sure that we could participate in the user success in YouTube".

Google has declined to comment on the story.

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