It has been more than 13 years since Youtube was acquired for $1.65 billion by Google back in October 2006.
Founded in February 2005, with $11.5 million total venture funding and 65 employees at that time, Youtube commanded 46% of visits to U.S. online-video sites in September. That compared with a 21% share for the video activities of News Corp.’s MySpace site and 11% for Google Video. Youtube had close to 20 million monthly visitors in August 2006.
A year and half before Youtube’s acquisition, MySpace’s parent company Intermix Media Inc. was acquired by News Corp. for $580 million.
Back then, Google reported total revenues of $6.14 billion in 2005 and $10.60 billion in 2006, and had a market value of $132 billion. Its net income was $3 billion in 2006 with $3.6 billion cash flow from operations and more than $11 billion cash balance.
On Monday Feb 3, 2020, Alphabet first provided the breakdown for some of its non-Google-search businesses, including Youtube.
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Year Ended December 31,
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2017
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2018
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2019
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Google Search & other
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$
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69,811
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$
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85,296
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$
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98,115
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YouTube ads(1)
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8,150
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11,155
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15,149
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(1) YouTube non-advertising revenues are included in Google other revenues.
Youtube ads generated $4,717 million revenue in 2019 Q4 – a ~$19 billion run rate.
Using a multiple of 5.0x, Youtube could be valued at ~$100 billion – a 60 times return for google acquisition or an IRR of 37% for 13 years.
I guess the success formula is: with the right synergies, acquire early & provide support to grow it.