Presents Google-YouTube Acquisition Case Nov 14,2007

 Total price tag of YouTube Acquisition:$1.65 Billion Google paid for this acquisition with their portfolio stock in a stock-for- stock transaction which had the additional benefit of being tax-free  Sequoia Capital initially invested $11.5 million in YouTube $3.5 million in Round 1 financing $8 million in Round 2 financing  Sequoia also held a 30% stake in YouTube, thus at the time of acquisition they received 941,027 of Google stock.  Monetary Value for Sequoia: In Oct 2006, Google share price was $ $ x 941,027= $444,258, This represents a 41x return In Nov 2007, most recent Google share price is $ $ x 941,027= $594, 794, This represents a 52x return

 “Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community.” - Google press release 1  Reap the benefits of a growing YouTube user base From 100 million to 200 million views/day in 8 months 2 Provides a business model to monetize YouTube quicker and better than anyone else  Improve the search experience for YouTube users 3 Coincides with Google’s mission to “organize the world’s information and make it universally accessible and useful.” 4  “Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers” - Eric Schmidt, Google CEO 1 Leverage its advertiser relationships Overlays Sources: and 3

Short Term Objectives:  Competition If Google would not have acquired YouTube, it was likely that Microsoft or Yahoo! would have bought it to compete against Google in the web space.  Introduction of Google advertisements to Video advertisements According to eMarketer, the video market is worth $775 million in 2007 and has been projected to be $4.3 billion by By buying YouTube, Google intended to enter the video advertisements market  Licensing Content to television Long Term Objectives:  Google’s ongoing mission to organize the world’s information and make it universally accessible and useful  Increased User Base You Tube has 20 million regular users and 100 million video views per day. It is Top 10 website on the net. By acquiring YouTube, Google would be able to increase their user base.  “To put video at the heart of a user’s online experience”, Eric Schmidt, CEO of Google – Focus on the user and all else will follow

Benefits of Acquisition for both parties Google to YouTubeYouTube to Google Reputation Censorship : Google could effectively channel its vision and expertise on "managing" freedom of speech towards YouTube allowing YouTube to manage its video library more responsibly. N/A Resources Advertisement platform: YouTube is able to use advertisement platform from Google. Video Content: Around 100 million videos are available on YouTube on a given day, with 65,000 new videos added every day. Legal protection Copyright issue: Google has strong legal team to fight legal battle for Youtube. N/A Business development Profitable revenue model: Google is able to make YouTube grow faster and profitable 1.Video adverts in YouTube videos 2. Selling premium video 3. Licensing content User base Youtube has large and increasing user base. The average visitor spends 28 minutes on YouTube.

Business Concerns  At the time of acquisition, YouTube had been criticized for not being profitable, due to high server costs and lack of a sufficient revenue source 1 Legal Issues  Because users can upload copyrighted material for public viewing, many thought that YouTube would inevitably be sued for copyright infringements 2 Ethical Issues  YouTube is in the difficult position of having to regulate content, and has been criticized for their censorship of certain materials over others 3 Sources:

RiskMitigationSeverity/Prob. Misalignment of decision making for YouTube’s business between the Google Trio, and YouTube founders. Google allowed YouTube to operate independently, with little interference in its operation process. High/Medium Merging might cause current YouTube employees to leave the company. Google allowed YouTube to maintain its own culture and working environment High/Low Merging might dilute YouTube’s brand image, and negatively affect its traffic. YouTube would retain its distinct brand identity, strengthening and complementing Google's own fast-growing video business Medium/Low Introducing Ads to YouTube videos could potentially affect user’s viewing experience, leading to discontent in the YouTube Community. ---High/Medium