Google Paid $1 Billion Too Much for YouTube? What Will It Pay for Twitter?
The big news this morning is a CNET report quoting Google CEO Eric Schmidt’s admission that he paid around $1 billion too much for YouTube.
Here’s an extract from Schmidt’s deposition in the ongoing Viacom suit:
Schmidt: I believe YouTube was worth somewhere around $600 million to $700 million.
(Viacom Attorney) Baskin: And you communicated that to the board?
Schmidt: I did.
Baskin: What methodology did you use to come up with that number?
Schmidt: My judgment.
Baskin: Was it based on cash flow analysis? Comparable companies? What were you using as the basis for your judgment?
Schmidt: It’s just my judgment. I’ve been doing this a long time.
Baskin: So you orally communicated to your board during the course of the board meeting that you thought a more correct valuation for YouTube was $600 million to $700 million; is that what you said, sir?
Schmidt: Again, to help you along, I believe that they were worth $600 million to $700 million.
Baskin: And am I correct that you were asking your board to approve an acquisition price of $1.65 billion; correct?
Schmidt: I did.
Baskin: I’m not very good at math, but I think that would be $1 billion or so more than you thought the company was, in fact, worth.
Schmidt: That is correct.
Is anyone really shocked by this? Did the jaw of any Pilgrim not drop when the purchase price was originally revealed? I mean, Google paid $1.65 billion for a company that had no discernable revenue. It paid that price based Schmidt’s "judgment."
It paid based on hype.
Which leads us to Twitter. And you thought you’d get to read at least one post without mention of Twitter. 
You see, Twitter is the modern-day YouTube. It has all the hype and none of the revenues. If you removed hype from the math, Twitter is worth a couple hundred million. Throw hype and momentum back into the mix and Twitter is easily worth more than what Google paid for YouTube.
All Twitter needs to do is create a rumor that one of the big tech companies–Microsoft for example–is sniffing around. That’s what caused Schmidt to abandon logic:
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.
Sometimes you buy a company based on what it would be worth if your biggest rival got its hands on it. To Google, that was worth the extra $1 billion. Now we just need to see how badly someone wants to get their hands on Twitter!
Don’t Take Facebook’s Word for It, Let Nielsen Help
Facebook is taking steps to help advertisers understand just how valuable advertising on Facebook can be. While there has been some discontent in the advertising community re: Facebook’s effectiveness as an advertising vehicle the Wall Street Journal tells of the new alliance Facebook has with Nielsen. Under the partnership, Facebook will begin polling its users about some of the display ads it runs on its site, such as a banner promoting a movie release.
Facebook will provide that data, including responses from those who didn’t see an ad, to Nielsen, which will package it for advertisers, say the companies.
Facebook COO Sheryl Sandberg gets one thing that is important for sure when it comes to advertisers and data
Ms. Sandberg said the new Nielsen polling service will help prove to advertisers that Facebook’s display ads work. “It can’t just be you who proves it. It has to be a third party,” she said.
This is an important point that most Internet marketers seem to miss. The Internet allows anybody to say anything at anytime. This has especially been true around sales tactics for Internet marketing services. The hyperbole and the flat out lies about guarantees etc. While not perfect, it is a good idea for any provider of Internet marketing to be able to back up their claims with something other than their ‘good name”.
Right now Facebook is looking like it has some momentum that could help it hit the $500 million in revenue number that has been thrown down. Advertisers are using the platform including Sony to pimp its movies. Some of the campaigns are being measured in millions of dollars.
So kudos to Facebook for being mature enough to do something that is more solid business practice than brilliant marketing move. It doesn’t matter who you are or where you work, having a fresh set of outside and objective eyes to ensure things are on track. Sure it may cost some money but the cost of not being examined could have a much larger impact.
Do you or your company enlist the services of any third party objective providers to see where you may or may not be hitting the mark with your Internet marketing? Do you see the value of such a practice? Why or why not?
Department Of Justice Files Objections To Google Book Search Settlement
As expected, the US Department Of Justice today has filed a list of objections and modifications it would like seen made in the proposed settlement to the Google Book Search lawsuit. It’s not saying that the settlement should go back to square one. In fact, it suggests that “momentum” potentially could be lost to improve [...]
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The Reality of Real Time Hits Real Hard
It appears that some folks are starting to slow down on the Twype (Twitter hype, of course) and looking at the bigger picture impact that the service is making. Whether Twitter survives and / or thrives is not the point really. It’s a very real possibility that the folks at Twitter may have set the table for other niche players to come in and take advantage of the trend that Twitter has really accelerated; which is real time information retrieval.
One person who has had significant success in making real time information work is Marc Benioff, co-founder and chief executive of Salesforce.com. Here’s a guy that can sure spot a need (not just a fad or a trend but a real need) and build a solution that meets the need head on. He helped bring the SaaS (software as a service) CRM and sales force automation business to the forefront of business applications and has been the industry leader ever since.
Over at DigitalBeat there was coverage of Benioff’s presentation at the Structure 09 conference in San Francisco. He said
Customers …. expect everything to happen right away— if they update their data, they expect those changes to appear immediately, not an hour or two in the future.
“Any concept of batch or delay in development or execution, I think, will not be tolerated by customers anymore,” Benioff said. “Even in development, customers are demanding now that they want to be able to build in that sandbox and deploy immediately, instantly, no delay.”
Basically, the speed of the real time Internet is now moving into the application world as well. Real time data is the beauty that sits at the center of Twitter. Will Twitter be able to capitalize on it? Who knows? There is a possibility that their free offering that is gaining so much momentum could end up hurting them on the revenue side. But how or if Twitter makes money is almost irrelevant.
What is more important is a real sea change that is occurring which shows that in business it’s real time or it’s no time. While it may not be practical or even possible to have true real time for everything most companies should be tapped into some form of real time availability of information that occurs outside their four walls. If not, they stand a real chance of being left behind. Now that this reality is hitting the inner workings of core company systems and not just the marketing areas, the adoption of Twitteresque services of the world only stands to escalate more rapidly. One thing is for certain ; Benioff is a Twitter evangelist.
Many companies haven’t realized this is where things are headed, he said. Benioff recounted attending meetings with chief information officers who all refused to believe that Twitter represents anything significant; they don’t have accounts themselves because “it’s not their generation.” Benioff’s response? He types the name of their company into Twitter search and shows that they’re missing out on a huge part of the conversation.
I am no Marc Benioff but I have used the exact same technique myself to open the eyes of business people who are in complete denial that there is activity about them on the Internet much more often than they think or want to even know. Of course, they can continue to stick their head in the sand or plug their ears screaming “I can’t hear anything!” That’s their call. The real time piece of the new world order of business is no surprise to many marketers but it may actually be under publicized at this point in time. It looks like most of the business world may need to be slapped into reality. Who better to do it than front line marketers who may have mistakenly thought that everyone is getting it. It’s obvious that they are not.
For those who decide that this is just a fad or a trend I suggest you hire an executive search firm that specializes in placing high-level executives in dying industries with old school thinking. Once they get bounced from a real world company that is in tune with what is truly happening, they can quietly be put out to pasture and wait for the end. It’ll happen sooner than they think.
Facebook Beats MySpace in the US
23,000 users couldn’t be wrong. Or within the margin of error. Nope. comScore is definitely, totally, 100% correct when they report that their May data indicates Facebook has just barely edged out the formerly most popular social network in the US, MySpace—70.278M to 70.255M.
Okay, even if the difference—0.03%—is well within the margin of error, the point stands: Facebook has at least caught up with, if not surpassed, MySpace in the US.
Facebook has long dominated the world in the social networking sphere—just a few months ago, Nielsen pointed out that they’re the most popular social network in almost every country. But until now, MySpace has held on to its lead in the US.
TechCrunch’s Erick Schonfeld says that the trend isn’t likely to change in the future:
Don’t expect MySpace to reverse this trend and regain its top spot anytime soon. Having just successfully launched its “vanity URLs,” Facebook looks to be on the verge of another hype cycle. Just 15 minutes after the launch, a half million people had signed up for vanity URLs. And as of sometime today, some 6 million users will have apparently signed up — just three days after it launched. Practically everyone is talking about the company once again, from blogs to the mainstream media.
Plus, as you can see from comScore’s graph above, the companies’ momentum are heading in opposite directions. Back in January, Facebook had twice the monthly uniques of MySpace worldwide. In February, we saw evidence that much of Facebook’s growth was coming from “older” users (as opposed to the site’s former typical college-aged users).
What do you think? Is there anything MySpace can do to reverse its fortunes with the media and users?
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comScore: Bing May Have Had Promising First Week
Consistent with some what we’ve been seeing and hearing from other measurement firms, Bing appears to have developed a bit of momentum since launch. Out this morning is comScore data:
Microsoft Sites increased its average daily penetration among U.S. searchers from 13.8 percent during the period of May 26-30 to 15.5 percent during the period of [...]
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Newspaper Ad Revenue Drops a Shocking $2.6B in Q1
Yup, that’s a B as in billion. Just when you think the newspaper industry can’t take another hit it gets hit with a haymaker. According to TechCrunch, the Newspaper Association of America reported a 28.28% year over year in Q1. That number’s monetary equivalent is $2.6B and that’s a stunning number even to an already beleaguered industry.
TechCrunch says
The sharp decline is caused by the lousy state of both digital and dead tree ad sales: the stats posted on the Newspaper Association of America website show that print sales fell by 29.7% in the first three months of this year (to $5.9 billion), while online sales dropped a record 13.4% (to $696.3 million).
Now it almost feels like dog piling on newspapers. With papers closing and the threats of closings being thrown around the kind of graph you see below almost seems unfair. It’s almost like you want the industry to cry “Uncle!” and just throw in the towel.
While most would say that newspapers aren’t going to vanish those same folks would say that the newspaper’s reach and influence will be determined by how well they move their offerings online and if they can get subscribers to pay for their content. The theory is that you pay for paper delivery then you should pay for online. Makes sense but most end users don’t see it that way at all unless there is a specific niche that will support the information that makes their jobs easier with most being related to business.
So is this the bottom yet for the industry? Not likely.
Annual ad sales for American newspapers came in at a grand total of nearly $49.5 billion in 2005 and dropped to about $37.8 billion in 2008. If the decline rate keeps accelerating the way these first quarter results suggest, we could be looking at somewhere in between $26 billion and $30 billion in total ad sales revenue for this year.
The momentum that the deconstruction of the newspaper industry has gained makes it unlikely that newspapers will ever see their heyday numbers again. The new era of ‘newspapers’ is going to need to get underway now if there is to be any papers of note in the future.
So let’s fast forward 10 years from now. It’s 2019. What does the newspaper industry look like. Is it relegated to museum displays or is there still a remnant remaining. Is it possible to see a bounce back by the industry? If so what could that look like? Feel free to jump in the time machine and take a look. Tell everyone what you see – if anything.
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