Gordon's post below asks the ultimate question: Why do this? The "this" of course is acquire YouTube, the unspoken "who" is Google. Reports this week have been criticial of this alliance, remarking on the future legal problems inherent in YouTube's business plan and the heavy reliance on advertisers for revenue. Here's a cynical view of "why":
Google has 11 board members. One of those board members is Michael Moritz, a big partner at Sequoia Capital. Sequoia Capital owns approximately 30% of YouTube and stands to turn an $11 million investment into a $495 million take-home. This NYT article explains how Google may be emulating a Japanese business custom of "interlocking relationships" (keiretsu) where "friends sell to friends." Of course, in the U.S., friends may sell to friends, but at some point we have to consider whether these interlocking relationships turn an acquisition into a related-party transaction.
Here, probably not. Although the three Google board members (Schmidt, Brin, and Page) may feel obligated to Sequoia Partners for past investments, a court would probably not look to a historical economic relationship to find dependence. Two of the board members are presidents of Stanford and Princeton. Although both schools' endowments invest in venture capital, unless the schools are current investors in Sequoia Partners (and I can't find any evidence of that), then they will be independent as well.
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1. Posted by Dave! on October 10, 2006 @ 12:33 | Permalink
The best comment on "why" I've seen recently is this gem.
But Forever Geek has some good comments as does Fred.
I think the fact that this is a stock only deal is the most interesting. Investors seem to like it, and if the market felt they overpaid it would have reacted accordingly, effectively lowering the value of the deal in the long run.
2. Posted by Jake on October 10, 2006 @ 20:30 | Permalink
History repeats itself. An innovative and survivable business plan for Internet services may fall prey to M&A, the most reliable destructor of shareholder value ever devised (but, to be fair, an impressive creator of value for Wall Street and its law firm servants). Companies that "grow" by buying others, rather than trusting and following their own internal growth prospects, are on their way to oblivion even if they are temporarily blinded to the fact.
3. Posted by diego on December 30, 2007 @ 9:35 | Permalink
I always read about YouTube's business plan but I never found it... Where can I see a (even old) copy of the YouTube's BusinessPlan? Thanks fot suggestions, Diego don_diego_2007@yahoo.it
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