Blog Eduardo Collado

By Sara Kehaulani Goo
Washington Post Staff Writer
Monday, October 9, 2006; 12:56 PM

Google Inc. will likely announce an acquisition of online video Web site YouTube Inc. for $1.65 billion in stock today after the market closes, according to a person familiar with the matter.

In less than a year, YouTube built an audience of over 34 million unique monthly visitors who visit the site to watch short home videos, even though some videos include copyrighted material used without permission. Unlike the days of music-file sharing site Napster, TV networks and music firms that at first appeared to be threatened by YouTube started to form deals with the start-up in recent months, realizing that the power of online video was something they needed to take part in–not fight.

Several analysts said they were surprised by the nature and price for YouTube’s sale. Just a year ago, social networking site MySpace.com sold to Rupert Murdoch’s News Corp. for $650 million, a price that amounted to about $10 per member, according to senior analyst Brian Haven, of Forrester research. Since then, college-networking site Facebook has been said to be in talks with Yahoo Inc. to sell for $1 billion. The YouTube deal amounts to a much higher price per audience member, about $22 per person, Haven said.

“It’s a little high,” Haven said of the price. “But online video is really exploding. There’s a lot of profit for it in the future.”

The deal would aim to help Google develop a larger online video presence, a move the search engine giant has been eager to do but found little traction. Google launched Google Video which allows Internet users to pay to watch certain television shows and other content, but its user-generated video content lags well behind that of YouTube. More than 100 million videos are viewed on YouTube every day, and the site now commands four times the traffic of Google Video, according to Hitwise, a firm that measures online video audience share.

“This would be indicative that Google wants to expand the capability of YouTube much deeper into the video space,” said technology analyst Rob Enderle.

Separately, YouTube and Google announced partnerships today with media firms to provide more video content on their sites. Google announced a deal with Warner Music Group to show music videos on Google Video. YouTube announced deals with two music companies, Vivendi’s Universal Music Group and Sony BMG Music Entertainment to provide music videos and allow Internet users to incorporate music into their own videos. A YouTube deal with CBS Corp. will provide short TV show promotions on YouTube’s homepage and CBS would sell banner advertising on the site, splitting the revenue with YouTube.

YouTube said that it would use a new technology to scan all content on the site for potential copyright violations, as part of the three deals.

“We’ve never been anti-YouTube. We’ve just been protecting our copyright,” said Dana McClintock, spokesman for CBS Corp. “Viral video is advantageous in some cases and in other cases, it’s not. [The deal with YouTube] allows us to be right in the mix of that process while getting paid for it.”