Comment by erikpukinskis | Hacker News Reader

Comment by erikpukinskis | Hacker News Reader

Parent Full thread

Are you serious? I think the whole "profit doesn't matter, only users" mantra is as stupid as anyone else, but you're way off here.

That mantra is asinine not because YouTube (and Twitter, and Facebook a couple years ago) are actually worthless... it's asinine because they are crazy exceptions.

YouTube gets about 2 billion views a day. Assuming each one of those views lasts about a minute, that's 1.4 million people watching at any given moment, 24 hours a day. The major TV networks get in the neighborhood of 6 million viewers during prime time... if they're winning.

So YouTube has roughly the same daily attention on it as NBC does. Why aren't they profitable?

a) They've had skyrocketing costs as they deal with explosive growth

b) They've had to convince the world that this totally weird new thing is a viable advertising platform.

That they've more or less solved those problems in 4 years and are close to profitable is pretty amazing to me, both as a developer and an entrepreneur. And the fact that their costs are going to go down (cost of bandwidth is cut in half every 18 months) while their profits are rising (advertising is advertising, and they're selling more and more), along with their enormous audience, suggests to me that they are, in fact worth a lot of money.

Do you not think that you could easily sell YouTube today for 1.5b? To any of a number of media companies? I think it'd be an easier sell today than it was when Google bought them.

I think that Google bought YouTube for 1.5b. I think they've probably dumped at least another 500 Million into them putting the total price tag at about $2B. Assuming for a minute that YouTube could reach profitability next year, I think it would likely take at least another 5 years for Google to recoup its initial investment.

Thats now a 10 year window before the YouTube investment does anything but drag on Google's bottom line and more importantly $2B dollars that Google can't spend on another, better acquisition.

Yeah I think YouTube was a mistake for Google, its the opportunity cost that kills me. I think that money could have been better spent elsewhere.

What opportunities did Google miss? They have plenty of cash, so I don't think buying YouTube prevented them from buying anything else they wanted.

The opportunities may not be traditional acquisitions. They could have spent that money buying fiber backbones, 4G Spectrum, clean or solar energy plants.

I would have much rather seen google branch out more into infrastructure then into another consumer facing web play, especially one with such a long window on ROI. Its not necessarily about having the money or not so much as how could that money have been better spent.

A nice counter example, in 2007 MS bought 1.5% of Facebook for 250M at a valuation of 15B. Currently Facebook shares are selling at a valuation between 100B and 200B - split that down the middle and that MS investment is now worth $2.5B, which makes their small investment in FB look a heck of a lot better then Google's Acquisition of YouTube.

EDITS - I keep adding to this point, I apologize. Most of this comes off of realizing that Google didn't even pay cash for YouTube, it was a stock acquisition.

NOTE: I should also say as an armchair analyst I thought Google's purchase of YouTube at the time was pretty good and MS's investment at the time in Facebook was pretty bad. I've now reversed my positions on both, so take that for what its worth.

IIRC Google now values YouTube at ~5Bn, and at that price I feel that there are plenty of companies who would bite Google's hand off.

> and at that price I feel that there are plenty of companies who would bite Google's hand off.

What does this expression mean? Does that mean that companies would think this is too expensive? or companies would jump at the chance to buy YouTube for 5 Billion?

It's not clear at all to me what you mean and I'm a native English speaker:)

If someone offers you a sandwich then you take a bite. If you are particularly enthusiastic or quick to react, you take a really big bite and bite their hand off.

It signals extreme enthusiasm and keenness. I hear it all the time (UK).

Ah, that makes sense:)

Thank you.

i think he means any company would jump on it.

it's like giving a hungry dog food. the dog would bite your hand off, along with the food.

Reply on news.ycombinator.com