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The price of YouTube?

Fancy buying YouTube? The New York Post and Techcrunch are reporting that site’s current owners value themselves at $1.5 billion.

Sam Gustin of The Post reports:

Internet upstart YouTube, the bane-du-jour of copyright holders everywhere, won’t sell itself for anything less than $1.5 billion, The Post has learned.

But that number far exceeds the price top media execs appear willing to pay for a company many believe lacks a sustainable business model.

“If they were willing to take $200 million to $300 million, I would buy it tomorrow,” a senior industry source told The Post.

Michael Arrington of Techcrunch weighs up the pros:

YouTube is serving over 100 million videos per day, with 65,000 or so new videos uploaded daily. Things are going so well for YouTube that founder Chad Hurley was recently quoted as saying that they have no plans to sell and that an IPO would be “very exciting for us”.

There’s a potentially staggering amount of revenue that YouTube could generate off of those video views. While today advertising is fairly limited to banner advertising on the site, integration of advertising directly into videos is a significant opportunity.

The addition of a simple static or video add into each video that appears at the end (and exactly where viewers eyes are as the video ends) would be easy revenue (see how Revver does this as an example). With 100 million videos viewed per day, assuming 100% sell through (impossible, but useful for analysis) and a $1 CPM, YouTube would generate $100k per day in revenue. As the site grows, this revenue opportunity would grow as well.

And cons:

These 100 million daily video views aren’t people watching kittens fall asleep. Most of the popular videos on YouTube contain copyrighted material that YouTube shouldn’t be presenting in the first place. This isn’t just music videos and Saturday Night Live skits – if music is playing in the background while someone is dancing around, that’s still copyright infringement.

YouTube has some protection under U.S. law since they merely host this material posted by users. As long as they comply with the DMCA and take down copyrighted material promptly when requested, they are protected. That’s why you’ll often find your favorite bookmarked videos have vanished when you go back to the site.

YouTube has made significant efforts recently to reach out to copyright owners and has secured a couple of deals to mitigate the copyright issues they face.

YouTube is a phenomenon and has brilliantly exploited the gap in the market for a video sharing site (something which iFilm and Google Video have, so far, failed to do). But isn’t $1.5 billion asking a bit too much? Doesn’t this smack of the wacky hubris and irrational exuberance that caused the last dot com crash?

It has done very well up to this point but if it wants to become an eBay rather than a Priceline it still has to negotiate some significant hurdles. The main question is still: how can they monetise their vast user base without compromising the qualities that has made them so popular?

Maybe they have a big plan to do this but if a big media company snaps them up then I would guess rivals (who could also be failed bidders) would issue plenty of copyright lawsuits just to create problems. Added to that, if YouTube can grow so fast, so quickly, then who’s to say a cooler upstart won’t eat into their traffic sometime in the near future?

> Techcrunch on the YouTube valuation
> The New York Post with their take