Youtube: Inside Job?

I recently attended a conference focused on startups. The topic uppermost on the minds of all and sundry was Google’s 1.65B acquisition of Youtube. It has certainly left most people scratching their heads. Entrepreneurs are busy trying to figure out how Youtube did it. “They have no f….. business model” complained one. “More than half the stuff there is copyrighted stuff” complained another. “What technology do they have? Nothing. What business model do they have? Nothing. Yet every VC I talk to wants to see these! How the heck did these guys get funded?”, lamented another.

There have been experts who have claimed that Youtube was profitable. There have been others who have questioned the math.

Check out this article in the Mercury News. Here is a relevant quote from the article.

“I don’t think we would have spent $1.6 billion to acquire YouTube,” Levinsohn said. But, he added, “If you’re going to run a (sale) process of one of the hottest companies on the Internet, you should do that openly. There’s no advantage to shareholders to do these things in private. You don’t necessarily get the best value in the market. If it were out being shopped, maybe it could have sold for $2 billion.”

Based on this comment one can certainly infer that Fox was never approached by Youtube. Considering that Fox has deep pockets, Fox had recently acquired MySpace, and the fact that Google recently had a huge ad deal with Fox, it would make sense for Youtube to have at least approached Fox?

Sequoia — backers of both Youtube and Google won’t obviously comment on this. But if you are an entrepreneur, you would do well to stop trying to figure out Youtube’s business model or its non-existent technology edge and instead see if you can get the right VC to back your next idea — dotcomm-ish or otherwise. The fact the Sequoia would laugh all the way to the bank was a foregone conclusion (scroll down to see my comment/prediction:-), well at least for the most part.

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One Response to Youtube: Inside Job?

  1. […] Net Gain again? ) Top VC firms appear to be backing this model once again inspired by the sale of Youtube, Flickr, Skype, Writely, Jotspot, Blogger (to name a few), all of which had no revenue model so to […]

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