Peter Kafka

Recent Posts by Peter Kafka

How to Spend a Billion-Plus on User-Generated Content, Google Edition

Super-charged growth? Yup. Fueled by user-generated content that comes with potential copyright headaches? Got it! Barely there revenues? Of course!

Billion-dollar-plus price tag? Check!

Yes, all of that describes the Yahoo-Tumblr deal. And it also describes Google’s move to buy YouTube in the fall of 2006.

Which doesn’t mean the two deals are parallel, of course. For starters, the $1.6 billion Google spent on YouTube was a drop in the bucket for the search engine. But $1.1 billion is spending is a very big chunk of Yahoo’s cash pile.

And even back in 2006 it was clear that video would be a crucial part of the Web. You can’t use the same certainty when you talk about cat GIFs.

More important is that, then and now, Google viewed YouTube as a nice complement to its core business, which has never flagged. For Marissa Mayer, it’s a crucial part of her strategy to bring new eyeballs to a faded brand.

Still! Fun to compare and contrast.

Here’s what we know about Tumblr: It’s seven years old, has a lot of users, and last year it lost money on $13 million in revenue. And for YouTube: It turns eight tomorrow, is reportedly on track to generate $4 billion in revenue this year*, and Google executives keep murmuring that it either is or could be profitable.

More interesting for today: Here’s what YouTube’s financials looked like for a two-year period ending August 2006 — shortly before Google bought it (the document comes courtesy of the never-ending Viacom-YouTube copyright fight). Note the sharp uptick in revenue, users and costs at the end. Perhaps Yahoo saw something similar:

youtube pl

*As with all YouTube revenue estimates, take Morgan Stanley’s most recent one with a big chunk of salt.

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