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20080126 - ed14 - Tetracolor - YouTube

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					                             Des Hommes, 4 Couleurs, Une Force




               Gestion financière des projets



    YouTube
                              ESCEM Tours


Année scolaire 2007 / 2008


Pour André CABANNES




Préparé par:

Eric MICHALSKI
Frédéric BAUDRON
Jacques BOULIC
Olivier SORET




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                                               Des Hommes, 4 Couleurs, Une Force


1.        Table of contents
1.     Table of contents ................................................................................................................................. 2
2.     Google................................................................................................................................................. 3
2.1.   History................................................................................................................................................. 3
2.2.   Growth ................................................................................................................................................ 4
2.3.   Philanthropy ........................................................................................................................................ 4
2.4.   Acquisitions ......................................................................................................................................... 4
2.5.   Partnerships ......................................................................................................................................... 5
2.6.   New mobile top-level domain .............................................................................................................. 5
3.     YouTube.............................................................................................................................................. 5
3.1.   Birth, history and strategy .................................................................................................................... 5
3.2.   Main steps............................................................................................................................................ 6
3.3.   Sequoia capital ..................................................................................................................................... 7
3.4.   Main competitor: DailyMotion............................................................................................................. 7
4.     Potential change after the acquisition ................................................................................................... 8
4.1.   How Google evolved with YouTube ................................................................................................... 8
4.2.   How YouTube is evolving after the acquisition by Google .................................................................. 8
4.3.   Key success factors for Google after YouTube acquisition .................................................................. 9
5.     Cash flow assumptions....................................................................................................................... 10
6.     Conclusion : Tetracolor draft analysis ................................................................................................ 13
6.1.   Google strategy .................................................................................................................................. 13
6.2.   Marketing view .................................................................................................................................. 13
6.3.   Finance view ...................................................................................................................................... 13
6.4.   Tetracolor point of view .................................................................................................................... 13
7.     Annexes ............................................................................................................................................. 14
7.1.   Google tools ...................................................................................................................................... 14
7.2.   Search engine and directories : “Competitors” ................................................................................... 16
7.3.   Web’s events from 2005 to 2007........................................................................................................ 17




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2.       Google
         2.1. History
History from CNNMoney.com
Google began as a research project in January 1996 by Larry Page. Larry was soon joined in his
research project by Sergey Brin. Larry Page hypothesized that a search engine that analyzed the
relationships between websites would produce better results than existing techniques.
Convinced that the pages with the most links to them from other highly relevant Web pages must be
the most relevant pages associated with the search, Page and Brin tested their thesis as part of their
studies, and laid the foundation for their search engine. Originally the search engine used the
Stanford website with the domain google.stanford.edu. The domain google.com was registered on
September 15, 1997. They formally incorporated their company, Google Inc., on September 7, 1998
at a friend’s garage in Menlo Park, California.
The name “Google” originated from a misspelling of “googol,” which refers to 10100. Having found
its way increasingly into everyday language, the verb, “google,” was added to the Merriam Webster
Collegiate Dictionary and the Oxford English Dictionary in 2006, meaning, “to use the Google
search engine to obtain information on the Internet.”
In March 1999, the company moved into offices at 165 University Avenue in Palo Alto, then in
2006, Google bought the property from SGI for $319 million.
The Google search engine attracted a loyal following among the growing number of Internet users,
who liked its simple design. In 2000, Google began selling advertisements associated with search
keywords. The ads were text-based to maintain an uncluttered page design and to maximize page
loading speed. Keywords were sold based on a combination of price bid and clickthroughs, with
bidding starting at $.05 per click. While many of its dot-com rivals failed in the new Internet
marketplace, Google quietly rose in stature while generating revenue.
A patent describing part of Google’s ranking mechanism (PageRank) was granted on September 4,
2001. The patent was officially assigned to Stanford University and lists Lawrence Page as the
inventor.
Financing and initial public offering
The first funding for Google as a company was secured in the form of a $100,000USD contribution
from Andy Bechtolsheim, co-founder of Sun Microsystems, given to a corporation which did not
yet exist. Around six months later, a much larger round of funding was announced, with the major
investors being rival venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital.
In October 2003, while discussing a possible initial public offering of shares (IPO), Microsoft
approached the company about a possible partnership or merger. However, no such deal ever
materialized. In January 2004, Google announced the hiring of Morgan Stanley and Goldman Sachs
Group to arrange an IPO. The IPO was projected to raise as much as $4 billion.
On April 29, 2004, Google made an S-1 form SEC filing for an IPO. The SEC filing revealed that
Google turned a profit every year since 2001 and earned a profit of $105.6 million on revenues of
$961.8 million during 2003.
In May 2004, the initial offering of shares was sold for $85 a piece. The public valued it at $100.34
at the close of the first day of trading, which saw 22,351,900 shares change hands.
Google’s initial public offering took place on August 19, 2004. A total of 19,605,052 shares were
offered at a price of $85 per share. Of that, 14,142,135 were floated by Google and 5,462,917 by
selling stockholders. The sale raised US$1.67 billion, and gave Google a market capitalization of
more than $23 billion. The vast majority of Google’s 271 million shares remained under Google’s
control. Many of Google’s employees became instant paper millionaires. Yahoo!, a competitor of
Google, also benefited from the IPO because it owns 2.7 million shares of Google.

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The company is listed on the NASDAQ stock exchange.

       2.2. Growth
In February 2003, Google acquired Pyra Labs. At its peak in early 2004, Google handled upwards
of 84.7 percent of all search requests on the World Wide Web through its website and through its
partnerships with other Internet clients like Yahoo!, AOL, and CNN. In February 2004, Yahoo!
dropped its partnership with Google, providing an independent search engine of its own. This cost
Google some market share, yet Yahoo!’s move highlighted Google’s own distinctiveness, and today
the verb “to google” has entered a number of languages, meaning, “to perform a web search”.
After the IPO, Google’s stock market capitalization rose greatly and the stock price more than
quadrupled. On August 19, 2004 the number of shares outstanding was 172.85 million while the
“free float” was 19.60 million.
On June 1, 2005, Google shares gained nearly four percent after Credit Suisse First Boston raised
its price target on the stock to $350.
On August 18, 2005 (one year after the initial IPO), Google announced that it would sell
14,159,265 more shares of its stock to raise money. The move would double Google’s cash
stockpile to $7 billion. Google said it would use the money for “acquisitions of complementary
businesses, technologies or other assets”.
On September 28, 2005, Google announced a long-term research partnership with NASA.
Additionally, Google has also recently formed a partnership with Sun Microsystems to help share
and distribute each other’s technologies.
With Google’s increased size comes more competition from large mainstream technology
companies. One such example is the rivalry between Microsoft and Google. Microsoft has been
touting its MSN Search engine to counter Google’s competitive position. Furthermore, the two
companies are increasingly offering overlapping services, such as webmail (Gmail vs. Hotmail),
search (both online and local desktop searching), and other applications.
While the company’s primary market is in the web content arena, Google has also recently begun to
experiment with other markets, such as radio and print publications. On January 17, 2006, Google
announced that it had purchased the radio advertising company dMarc. Google has also begun an
experiment in selling advertisements from its advertisers in offline newspapers and magazines, with
select advertisements in the Chicago Sun-Times. Google was added to the Standard & Poor’s 500
index (S&P 500) on March 31, 2006. Google replaced Burlington Resources, a major oil producer
based in Houston that had been acquired by ConocoPhillips. The day after the announcement
Google’s share price rose by 7%.

       2.3. Philanthropy
In 2004, Google formed a non-profit philanthropic wing, giving it a starting fund of $1 billion. The
express mission of the organization is to help with the issues of climate change.

       2.4. Acquisitions
Since 2001, Google has acquired several small start-up companies, often consisting of innovative
teams and products. One of the earlier companies that Google bought was PyraLabs. In early 2006,
Google acquired Upstartle, a company responsible for the online collaborative word processor. On
October 9, 2006, Google announced that it would buy the popular online video site YouTube for
$1.65 billion. The brand, YouTube, will continue to exist, and will not merge with Google Video.
Meanwhile, Google Video signed an agreement with Sony BMG Music Entertainment and the
Warner Music Group, for both companies to deliver music videos to the site. The deal was finalized
by November 13.



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On October 31, 2006, Google announced that it had purchased JotSpot, a company that helped
pioneer the market for collaborative, web-based business software to bolster its position in the
online document arena.
On March 17, 2007, Google announced its acquisition of two more companies. The first is
Gapminder’s Trendalyzer software, a company that specializes in developing information
technology for provision of free statistics in new visual and animated ways. On the same day,
Google also announced its acquisition of Adscape Media, a small in-game advertising company
based in San Francisco, California. Google also acquired PeakStream Technologies.

         2.5. Partnerships
Google has worked with several corporations in order to improve production and services.
On September 28, 2005, Google announced a long-term research partnership with NASA. In
October 2006, Google formed a partnership with Sun Microsystems to help share and distribute
each other’s technologies. Time Warner’s AOL unit and Google unveiled an expanded partnership
on December 21, 2005, including an enhanced global advertising partnership and a $1 billion
investment by Google for a 5% stake in AOL.
In August 2003, Google signed a $900 million offer with News Corp.’s Fox Interactive Media unit
to provide search and advertising on MySpace and other News Corp. websites including IGN,
AmericanIdol.com, Fox.com, and Rotten Tomatoes, although Fox Sports is not included as a deal
already exists between News Corp. and MSN.
On 6 December 2006, British Sky Broadcasting released details of a Sky and Google alliance. This
includes a feature where Gmail will link with Sky and host a mail service for Sky, incorporating the
email domain “@sky.com”.

         2.6. New mobile top-level domain
In coordination with several other major corporations, including Microsoft, Nokia, Samsung, and
Ericsson, Google provided financial support in the launch of the .mobi top level domain created
specifically for the mobile internet, stating that it is supporting the new domain extension to help set
the standards that will define the future of mobile content and improve the experience of Google
users. In early 2006, Google launched, Google.mobi, a mobile search portal offering several Google
mobile products, including stripped-down versions of its applications and services for mobile users.
On September 17, 2007, Google launched, “Adsense for Mobile”, a service to its publishing
partners providing the ability to monetize their mobile websites through the targeted placement of
mobile text ads. Also in September, Google acquired the mobile social networking site,
Zingku.mobi, to “provide people worldwide with direct access to Google applications, and
ultimately the information they want and need, right from their mobile devices.”

3.       YouTube
Informations from youtube.com, wikipedia.org, lemondeinformatique.fr, journaldunet.com and novethic.fr


         3.1. Birth, history and strategy
Born in February 2005, YouTube was a consumer media company for people to watch and share
original videos through a Web experience.
The 7th of November 2005, YouTube announced that it has completed a $3.5M round of private
equity funding from Sequoia Capital. YouTube, founded by Internet commerce pioneers from
PayPal, has developed a new service that allows people to easily upload, tag, and share personal
video clips through www.YouTube.com and across the Internet on other sites, blogs and through e-
mail. The service also allows users to create their own personal video network.


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This investment has been used to accelerate the company’s rapid growth, enhance product
development and expand sales and marketing efforts.
“With more and more people carrying around devices that capture video-from digital cameras to
cell phones-YouTube is set to become an essential destination for watching and sharing these
experiences,” said Chad Hurley, CEO and co-founder of YouTube. “We are very pleased by the
support of Sequoia Capital. Since our public preview, we are already moving 8 terabytes of data per
day through the YouTube community - the equivalent of moving one Blockbuster store a day over
the Internet.”
Prior to YouTube, it was not easy for people to make video available on the Web. The burden was
on the user to support all the media players and the 100s of multimedia formats. YouTube is using
its advanced technology infrastructure so consumers can broadcast their videos globally in a fast,
fun and easy way.
“We are very excited to be involved with YouTube at a time when consumers are poised to benefit
from all the consumer electronics available. The demand for user-generated content continues to
grow exponentially,” said Roelof Botha, Sequoia Capital partner and former CFO of PayPal.
“We’ve already seen user-generated content blossom in text through blogging, in photographs
through services like Flickr and Shutterfly, and in audio through podcasting. YouTube is pioneering
the next wave to become Internet’s premier video service.”
In april 2006, YouTube has received $8M in Series B funding from Sequoia Capital. This
contributes to the initial $3.5M in Series A funding from Sequoia Capital completed in November
2005. The additional capital has been used to advance the company’s rapid growth, expand sales
and marketing efforts, and to accelerate the build-out of its world-class data centers.
“This is the birth of a new clip culture where the audience is now in control more than ever,” said
Chad Hurley, CEO and co-founder of YouTube. “With more than 35 million videos being watched
daily on YouTube, our community is extremely passionate about watching and sharing videos. As
the leading video entertainment destination on the Internet, we are committed to offering the best
user experience and the best platform for people to share their videos around the world. The
continued support from Sequoia will help us reach this goal.”
YouTube is the largest community on the Web for short-form video, with tens of thousands of clips
uploaded every day by indie filmmakers and musicians, professional content creators, and anyone
with a video camera or camcorder. Entertainment by its nature is both a personal and communal
experience and YouTube is providing the stage. Everyone can express themselves by creating
content and distributing it through YouTube—and our community decides which videos rise to the
top.
“YouTube is at the forefront of a cultural shift in digital media entertainment and media distribution
and we are delighted to continue our support,” said Roelof Botha, Sequoia Capital partner and
board member. “With more than 100M page views per day and 6M unique users daily,
YouTube has an opportunity to expand its business while allowing its users to continue to share in
the entertainment experience they have created.”
“We are pushing the boundaries of the Internet in ways that are unparalleled,” said Steve Chen,
CTO and co-founder of YouTube. “By accelerating the build-out of our data centers around the
world, we are poised to continue to serve up billions of videos in the most scalable and cost-
effective way.”

       3.2. Main steps
(see § 7.3 for schedule’s details)



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The first event’s analysis show us there is a real competition : YouTube and DailyMotion have
made a similar upload in funding with only 5 month spaced !
Have a look on the classified summary of event’s before acquisition by Google – (during 1 year) :
   • partnership : G4, NBC, WarnerMusic, CBS, Universal music
   • agreement : SONY,
  • R&D : new content identification architecture, new advertising concept

Whereas after acquisition by Google – (during 1 year) :
  • partnership : national hockey league, BBC, BMI Music, AppleTV, Hearst Argyle TV, LG,
  • contest
  • R&D : diffusion on mobile,
  • Service : YouTube video awards, « international » language, Presidential debates (with
      CNN),
  • Non profit program

No doubt that the acquisition by Google has been an accelerator of growth for YouTube.

       3.3. Sequoia capital
Since 1972, Sequoia Capital has provided startup venture capital for very smart people who want to
turn ideas into companies. As the “Entrepreneurs Behind the Entrepreneurs”, Sequoia Capital’s
Partners have worked with innovators such as Sandy Lerner and Len Bozack of Cisco Systems,
Jerry Yang and David Filo of Yahoo!, Gaurav Garg of Redback Networks, Larry Page and Sergey
Brin of Google, Dan Warmenhoven of Network Appliance, T.J. Rodgers of Cypress
Semiconductor, Lou Tomasetta of Vitesse Semiconductor, Steve Jobs of Apple Computer and Larry
Ellison of Oracle. The companies organized by Sequoia Capital now account for about 10% of the
value of NASDAQ.
The fact that Sequoia capital is the same “business angel” for YouTube than Google few years
before is perhaps one point which was taken into account in the valuation of YouTube. Google
knows the “rule” and should have included it into its valuation.

       3.4. Main competitor: DailyMotion
Dailymotion is a company of French origin offering an on-line service of sharing and visionnage of
clips videos.
Possessing the second place at the world level sites of its category, just after the American YouTube
(belonging to Google) but in front of Metacafe, the Web site of Dailymotion counts approximately
40 million pages seen a day and more than 3 million unique guests a day in May, 2007. Besides,
these import 15000 new videos a day. The number of subscribers amounts on the whole to
approximately 7 million persons.
Create in February, 2005 by Benjamin Bejbaum and Olivier Poitrey, following a journey in New
York, the company benefited from the beginning from a financial support on behalf of individual
investors, first of all to the amount of 250 000 €. In September, 2006, the organization revealed that
a levying of fund with two investment fund, Atlas Ventures and Partech International allowed them
to receive 7 M€, what was considered as the levying of fund the most expected from the year in
Web 2.0 French. Reports by the Newspaper Wall Street in its edition of August 31st, 2007,
Dailymotion would have raised 34 million dollars (24,87 M€) supplementary with the fund of
British investment Advent Venture Partners and French AGF Private Equity,



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Dailymotion is regularly in the center of debates on the use of copyright. It was the object of
numerous pursuits, of which the most recent, on behalf of TF1, which demands him several million
euro dozens for the appropriation of its contents.
Using as YouTube the Flash technology to spread its contents, it distinguishes itself from it
however by the use of an engine of encoding developed internally and by the residence internally
proposed contents. This technological control comes because his creators worked previously at a
host. Besides, Dailymotion, contrary to Youtube, allows to keep the stereophonic aspect of the
soundtrack of videos.
To organize all the files, Dailymotion appeals to categories (called “channels”), keywords (as
makes it Flickr, among the others), or still for groups. The site also has an internal search engine.
The searches are made by typing tags, keywords. The Internet users can also make their impression
on videos, thanks to a system of posting of comments and give a note for every video.



4.       Potential change after the acquisition
         4.1. How Google evolved with YouTube
Google is investing in the different tools to be able to get money with advertising.
Google wants to be the number 1 for the services on World Wide Web (at least the leader). Google
wants to be an actor and not only a search engine.

To be an actor, Google needs to have other tools available for internet users such as Film outlet,
mobiles with video, video sharing capability, pictures , space to share picture, GPS, Browser,
Browser linked to GPS, Advertising linked to GPS allowing direct marketing, ….
Google, with the YouTube purchase, is buying a market of users using often the web. This big
number of internet user will be logged in map or market segment and will received well targeted
advert. The reception of these well targeted promotions will be accepted by the internet users who
are globally reluctant to all the massive advertising on the web (publiphobe = phobia of advert).
Google already started these targeted promotion on the video games and is starting the advertising
in Youtube.

Google is integrating YouTube in their strategy including the video to the future mobile system
“Google phone”. It will be possible to get video by the mobile and to share these video through the
social network Google. These capabilities will capture internet users and will be the basic for the
advertising.
Google will need to keep the consumers by adding new emergent services and will need to satisfy
all internet users

         4.2. How YouTube is evolving after the acquisition by Google
YouTube now is using the hardware from Google. YouTube used to work on hardware and on
content. Now they can focus on content only.
They are looking to different means to increase the quality of the video that the internet users are
logging on their web site.
To increase the quality, they are starting to pay the producer of video who are producing good
Quality.
You Tube is focusing on the advertising / promotion of the use of YouTube by creating a social
network around the videos.



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The segmentation of the video is on going. This segmentation will help the publicist to deliver the
right adverts to the internet users.


       4.3. Key success factors for Google after YouTube acquisition
Google want to be considered as key player and if someone needs something, the name Google
should come up in 90% of the cases.
Google will be used as the internet user will be satisfied

Google will stay in contact with customer and keep the customers for a while.
Google has tools. The contents are the “must-haves” to be able to keep customers / internet users.
Today YouTube is considered as leader on the video internet segment. Google by acquiring
YouTube is acquiring the quality level that they want to have to be able to keep customers.

Google is acquiring all new technology for WEB3.0 to keep up-to-date on technology.
Creation of a social network: people sharing their video and creating links between internet users.
People want to be considered as part of the world and Google with Youtube is integrating the
internet in the social network.
As Google wants to be the leader in the internet use, Google is promoting the web and allow with
tools the user to self develop. As YouTube has a large audience, Google is using the YouTube
notoriety, to promote all their other tools (partial list in annex)
After the acquisition of YouTube now Google has a tremendous number of video available on their
servers.
Google development is linked to the advertising. The best market segment for publicist is the high
potential internet users.
Google is still in process to increase the number of tools; Google wants to stay attractive to the
internet users who are keen of new technology.
Now Google has the content to have get interest on video on mobiles, which will be a key success
factor for the launching of their new product GooglePhone.




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5.     Cash flow assumptions
Google cash flow analysis for the years 2007 to 2011. The Turnover data are estimated using the trend of the last 4 years.
R1 and R2 values are justified page 12
               R2             27%
               R1             17%




              année            1             2            3           4           5            6            7            8            9           10


               R2             0,79          0,62         0,49        0,38        0,30         0,24         0,19         0,15         0,12         0,09


               R1             0,85          0,73         0,62        0,53        0,46         0,39         0,33         0,28         0,24         0,21




                                                                                               1            2            3            4            5
                                            2003         2004        2005        2006        2007         2008         2009         2010         2011         Total


              Milliers €           C.A:   1 110 329    2 415 584   4 649 473   8 032 385   11 400 000   13 400 000   16 000 000   18 600 000   20 700 000    80 100 000


                 Resultat net si H2 :      80 020      302 301     1 109 922   2 330 921   2 800 000    3 600 000    4 400 000    5 100 000    5 600 000     21 500 000


                    H2 :                    7%           13%         24%         29%         25%          27%          28%          27%          27%          27%


                      Progression CA :                  118%         92%         73%         42%          18%          19%          16%          11%




                    H1 : Hypothese resultat net pessimiste :                     29%         25%          20%          15%          15%          15%          17%




                    Resultat net si H1:                                                    2 850 000    2 680 000    2 400 000    2 790 000    3 105 000    13 825 000




                            H 1 réactualisé à 17 % :                                       2 435 897    1 957 776    1 498 489    1 488 884    1 416 225     8 797 272


                            H 2 réactualisé à 27 % :                                       2 204 724    2 232 004    2 148 036    1 960 448    1 694 999    10 240 211




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Turnover and net income projections over 5 years


  22   500   000
  22   000   000
  21   500   000
  21   000   000
  20   500   000
  20   000   000
  19   500   000
  19   000   000
  18   500   000
  18   000   000
  17   500   000
  17   000   000
  16   500   000
  16   000   000
  15   500   000
  15   000   000
  14   500   000
  14   000   000
  13   500   000
  13   000   000
  12   500   000                                                                                               C.A
  12   000   000
  11   500   000                                                                                               Resultat net
  11   000   000                                                                                               Linéaire (C.A)
  10   500   000
  10   000   000                                                                                               Linéaire (Resultat net)
   9   500   000
   9   000   000
   8   500   000
   8   000   000
   7   500   000
   7   000   000
   6   500   000
   6   000   000
   5   500   000
   5   000   000
   4   500   000
   4   000   000
   3   500   000
   3   000   000
   2   500   000
   2   000   000
   1   500   000
   1   000   000
       500   000
               0
                   2003     2004       2005        2006     2007      2008      2009     2010   2011




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It is difficult to confirm if the paid price is online with the economic situation, because it would be
needed to estimate the turnover of Google without YouTube

Google knows the development cost of similar tool as they have not succeeded to beat YouTube
with GoogleVideo

Nevertheless, the cash flow analysis, shows that the problem of Google economical model is carry
on to keep ramp up of its turnover

Google with its activity « search engine » already owns a big market share
Other competitors would like to offer “search engine” with another concept.

Google need to find new strategy to be present on Web and innovate (for ex GPhone).

By the way, the net income generated by this business model is more than sufficient for this kind of
business (Assumption R2). Even if this model will not reach the target expected by Google, the Net
income will stay positive and acceptable (Assumption R1).
The potential number of web user is close to 1,5 Billion and a stakeholder as YouTube who already
owns 46% of market share, is attractive for important web stakeholder.
The analysed discounted cash flow is showing that the amount of the investment is in relation with
Google size
To finalise a more precise analysis, we would need more information about origin of sales
(Adsense, Adword, ….) and a better estimation of the relation between YouTube user and sales
linked to these Web users.

This Web market is not yet in the plateau period and the web evolution has to be followed very
carefully by the stakeholder who wants to be part of the future.

The YouTube value has been reviewed on an economic point of view to estimate the value and the
impact on Google finance.

But the major impact has been checked on a marketing stand point of view.




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6.      Conclusion : Tetracolor draft analysis
        6.1. Google strategy
Google becomes the first Search Engine. Without an
agressive advertising policy, they have reached a
monopolistic situation. Microsoft represents only a quarter
of Google’s score which is the main indicator of the
Google’s strategy efficiency.


        6.2. Marketing view
YouTube’s users are people with high potential for consumers part of a market segment with
similar profile (attractive for publicist as it is people who have money).
More over, the model of development of Google has changed: they have to reach experienced
model to give the good service to the right consumer with the lower cost of resource. So they work
on the perception of the cost of the service (to generate the best margin) and develop many and
many services (small or bigger) to overflow the market and be “the first in mind”.
Google seems to be mature because they have also decided to invest into a « global attitude » : they
have made investments into research, on new energy with the goal to be self sufficient and with a
cost of energy lower than coal’s cost.

        6.3. Finance view
As we showed, the financial aspect is not the main way to analyse this acquisition: they had to find
the good driver for valuation and consolidate the forecast made. With this acquisition, Google
acquire also a new research center on advertising which confirm our financial assumptions for
Discounted Cash Flow.

        6.4. Tetracolor point of view
It is very difficult to tell if the acquisition value is too high or not (1.5 Billions dollars)

Google purchased a completed solution winning the setup and development TIME.
We can notice that the valuation of the capital of YouTube is only 11 M$ and it’s far away from the
price of the acquisition. It means that the valuation’s rules have changed: the capital of this sort of
company is not the money but the volume of the community. In this case, each people of this
community cost around 300 $ for Google or each time spent on watching video cost 10 $/y…
finally, the driver must be invented !
However this acquisition seems to be expensive, if we take into account that Sequoia Capital is the
main way to finance new internet project for the future and if we suppose that they get back 25% of
the amount of this acquisition, we conclude that this valuation is the computation of several factors :
            • the price to be the first to propose this service (included with others)
            • the fact that this community is the biggest (for the theme of sharing videos)
            • the publicity made by others medias about this amount
            • disposal of treasury
So, we think that this amount was not a great risk for Google and a good opportunity for Youtube :
a Win / Win transaction !
And today, competitors are still waiting for its buyers…


20080126 - ed14 - Tetracolor - YouTube                                                    page 13 / 18
                          Des Hommes, Quatre Couleurs, Une Force




7.    Annexes
      7.1. Google tools

  Rechercher                                    Explorer et innover
                      Actualités                       Labs
                      Effectuez          des           Essayez de nouveaux produits
                      recherches      parmi            Google
                      des milliers d’articles
                                                Communiquer, publier et partager
                      Alertes
                      Recevez l’actualité et           Agenda
                      des     résultats   de           Organisez votre emploi du temps
                      recherche par courrier           et partagez des événements avec
                      électronique                     vos proches
                      Annuaire                         Blogger
                      Effectuez     des                Exprimez-vous en ligne
                      recherches sur le
                      Web par sujet                    Documents
                                                       Créez et partagez vos projets en
                      Barre        d’outils            ligne pour y accéder où que vous
                      Ajoutez un champ                 soyez
                      de recherche à votre
                      navigateur                       Gmail
                                                       Email gratuit, anti-spam et 2,8 Go
                      Bloc-notesNouveau !              de stockage
                      Collectez        des
                      informations                     Groupes
                      pendant que vous                 Créez des listes de diffusion et
                      surfez sur le Web                des groupes de discussion.

                      Desktop                          Orkut
                      Effectuez       des              Faites des rencontres et restez en
                      recherches sur votre             contact avec vos amis
                      ordinateur                       Picasa
                      Earth                            Rassemblez,      retouchez         et
                      Une interface 3D de              partagez vos photos
                      la Terre                         Talk
                      Fonctionnalités   de             Appelez vos amis et chattez avec
                      recherche sur le Web             eux depuis votre ordinateur
                      Exploitez toutes les             Traduire
                      possibilités      de             Consultez des pages Web dans
                      recherche qui vous               d’autres langues
                      sont offertes




20080126 - ed14 - Tetracolor - YouTube                                     page 14 / 18
                          Des Hommes, Quatre Couleurs, Une Force


                      Google             Maps          YouTubeNouveau              !
                      Trouvez             des          Regardez, envoyez et partagez
                      adresses,           des          des vidéos
                      entreprises et      des
                      services             de   Sur votre mobile
                      proximité
                                                       Maps          pour        mobile
                      Images                           Affichez des plans et des cartes
                      Recherchez      des              et obtenez des itinéraires sur
                      images sur le Web                votre téléphone portable
                      Recherche de blogs               Mobile
                      Recherchez      des              Utilisez Google depuis         votre
                      blogs sur vos sujets             téléphone portable
                      favoris
                      Recherche de livres       Optimiser votre ordinateur
                      Effectuez        une             Pack
                      recherche dans le                Une suite gratuite de logiciels
                      contenu des livres               essentiels
                      Recherche sur le Web
                      Lancez           des
                      recherches sur plus
                      de 8 milliards de
                      pages Web
                      Video
                      Recherchez       des
                      vidéos et mettez en
                      ligne les vôtres




20080126 - ed14 - Tetracolor - YouTube                                       page 15 / 18
                           Des Hommes, Quatre Couleurs, Une Force




       7.2. Search engine and directories : “Competitors”
Altavista France    (search engine)
Abacho              (search engine)
Hotbot.com          (search engine)
Dmoz                (directory)
Free                (search engine)
Google              (search engine)
Lycos.com           (search engine)
Yahoo France        (search engine)
Voila Guide*        (directory)
Yahoo France        (directory)
Mirago              (search engine)
Altavista.com       (search engine)
Hotbot France       (search engine)
Aol France          (search engine)
Alltheweb           (search engine)
Google France       (search engine)
Lycos France        (search engine)
Mozbot.fr           (search engine)
Tiscali             (search engine)
Voila Moteur        (search engine)
Msn France          (search engine)
Indexa*             (directory)

English Search Engine and Directorys
Altavista.com       (search engine)
Google.co.uk        (search engine)
Dmoz                (directory)
Yahoo.com           (search engine)
Msn Search          (search engine)
Lycos.com           (search engine)
Hotbot.co.uk        (search engine)
Aesop               (search engine)
Overture.com        (search engine)
Temoa               (search engine)
Altavista.co.uk     (search engine)
Google              (search engine)
Gigablast           (search engine)
Alltheweb           (search engine)
Aol.com             (search engine)
Hotbot.com          (search engine)
Yahoo.com           (directory)
Euroseek.com        (search engine)
Netscape.com        (search engine)
Wisenut             (search engine)



20080126 - ed14 - Tetracolor - YouTube                              page 16 / 18
                                                                 Des Hommes, Quatre Couleurs, Une Force


                7.3. Web’s events from 2005 to 2007
   11/07                                                                                            Market          VeoSearch (search engine solidaire) lève 675 000 euros
   11/07                                                                                            Market          Publicité en ligne : AOL s’offre Quigo pour 300 M$
   11/07                                                                                            Market          Hausse de 72% des investissements dans l’Internet en France
01/10/07   YOUTUBE PREMIERES FIRST INTERNATIONAL FILM COMPETITION                                   Service
10/07                                                                                               Market          Microsoft place 240 M$ dans Facebook
10/07                                                                                               Market          Alenty (éditeur d’outils de marketing web 2.0) lève 370 000 euros
27/09/07   YOUTUBE DEBUTS NONPROFIT PROGRAM                                                         Service
11/09/07   YOUTUBE ONTHERISE RAP EDITION ‘07 WRAPS UP                                               Service
09/07                                                                                               Market          Yahoo se paye BlueLithium (publicité en ligne) pour 300 M$
08/07                                                                                               Competitor      Dailymotion lève 25 M€
30/07/07   YOUTUBE PASSES THE MIC TO USERS IN NEW MUSIC PROMOTION                                   Service
10/07/07   CASIO INTRODUCES TWO STYLISH NEW EXILIM® DIGITAL CAMERAS WITH YOUTUBE™ CAPTURE™ MODE     R&D
03/07/07   LG HANDSETS TO PROVIDE FULLY-FUNCTIONAL YOUTUBE SERVICE                                  Partnership
07/07                                                                                               Market          Twitter lève 5 M€
07/07                                                                                               Market          Zlio.com lève 4 millions de dollars
19/06/07   YOUTUBE SPEAKS YOUR LANGUAGE                                                             Service
14/06/07   CNN, YOUTUBE TEAM UP TO HOST FIRST-EVER VOTER-GENERATED PRESIDENTIAL DEBATES             Service
04/06/07   HEARST-ARGYLE TELEVISION REACHES INNOVATIVE CONTENT AGREEMENT WITH GOOGLE AND YOUTUBE    Partnership
06/07                                                                                               Market          Panoramio par Google
31/05/07   EMI MUSIC, GOOGLE AND YOUTUBE STRIKE MILESTONE PARTNERSHIP                               Partnership
30/05/07   YOUTUBE COMING TO APPLE TV                                                               Partnership
21/05/07   YOUTUBE SEEKS THE BEST SHORTS ON THE INTERNET                                            Advertising
05/07                                                                                               Market          Microsoft rachète aQuantive (publicité en ligne) pour 6 Md$
12/04/07   YOUTUBE LAUNCHES YOU CHOOSE ‘08 SPOTLIGHT                                                Service
04/07                                                                                               Market          Google rachète DoubleClick (publicité en ligne) pour 3,1 Md$
26/03/07   VOTES ARE IN FOR FIRST EVER YOUTUBE VIDEO AWARDS                                         Service
19/03/07   YOUTUBE ROLLS OUT THE RED CARPET IN CELEBRATION OF THE INAUGURAL YOUTUBE VIDEO AWARDS    Advertising
15/03/07   CBS SPORTS, THE NCAA AND PONTIAC BRING NCAA® MARCH MADNESS® TO SPONSORED CBS SPORTS NCAA Market
           TOURNAMENT CHANNEL ON YOUTUBE
02/03/07    BBC AND YOUTUBE PARTNER TO BRING SHORT-FORM BBC CONTENT TO ONLINE AUDIENCES          Partnership
01/03/07    YOUTUBE IGNITES ONLINE CAMPAIGNING WITH ITS YOUTUBE YOU CHOOSE ‘08 PROGRAM           Services
03/07                                                                                            Market             ADSclick (publicité en ligne) lève 3 M€
26/02/07   NBA AND YOUTUBE CHALLENGE FANS AROUND THE WORLD TO POST THEIR BEST BASKETBALL MOVES   Advertising
17/01/07   SUNDANCE CHANNEL VIDEO CLIPS AVAILABLE ON YOUTUBE IN 2007                             Advertising
01/07                                                                                            Market             Wikio lève 4 M€
01/07                                                                                            Market             AXA Private Equity finance la croissance externe de Brainsonic
29/12/06   YOUTUBE, CHEVROLET AND WARNER MUSIC GROUP PRESENT NEW YEAR’S EVE COUNTDOWN AROUND THE Advertising
           WORLD
08/12/06   YOUTUBE AND COCA-COLA INTRODUCE VIDEO GREETING CARDS FOR THE HOLIDAYS                      Advertising
29/11/06   YOUTUBE AND CINGULAR WIRELESS CROWN WINNERS OF FIRST UNDERGROUND CONTEST                   Contest
28/11/06   YOUTUBE GOES MOBILE                                                                        R&D
21/11/06   FRANK SINATRA ENTERPRISES AND YOUTUBE SPIN VEGAS CONTEST                                   Contest
21/11/06   AFTER ONE MONTH, CBS CONTENT AMONG MOST VIEWED VIDEOS ON YOUTUBE                           Advertising



      20080126 - ed14 - Tetracolor - YouTube                                                     page 17 / 18
                                                                 Des Hommes, Quatre Couleurs, Une Force
15/11/06   YOUTUBE AND NATIONAL HOCKEY LEAGUE TEAM UP FOR STRATEGIC CONTENT AND ADVERTISING PARTNERSHIP
                                                                                                      Partnership
14/11/06   GOOGLE CLOSES ACQUISITION OF YOUTUBE                                                       Market
10/10/06   GOOGLE TO ACQUIRE YOUTUBE FOR $1.65 BILLION IN STOCK                                       Market
09/10/06   UNIVERSAL MUSIC GROUP AND YOUTUBE FORGE STRATEGIC PARTNERSHIP                              Partnership
09/10/06   SONY BMG MUSIC ENTERTAINMENT SIGNS CONTENT LICENSE AGREEMENT WITH YOUTUBE                  Agreement
09/10/06   CBS AND YOUTUBE STRIKE STRATEGIC CONTENT AND ADVERTISING PARTNERSHIP                       Partnership
10/06                                                                                                 Market            Rachat de YouTube par Google (1,65 Md$)
25/09/06   YOUTUBE ISSUES CORRECTION ON NEW CONTENT IDENTIFICATION ARCHITECTURE FOR COPYRIGHT HOLDERS R&D
20/09/06   YOUTUBE GOES UNDERGROUND WITH PROMOTION TO DISCOVER UNSIGNED BANDS AND MUSICIANS           Advertising
18/09/06   WARNER MUSIC GROUP AND YOUTUBE ANNOUNCE LANDMARK VIDEO DISTRIBUTION AND REVENUE Partnership
           PARTNERSHIP
09/06                                                                                                     Competitor    Dailymotion lève 7 M€
22/08/06  YOUTUBE UNVEILS NEW ADVERTISING CONCEPTS                                                        R&D
27/06/06  NBC AND YOUTUBE ANNOUNCE STRATEGIC PARTNERSHIP                                                  Partnership
10/05/06  YOUTUBE TO GO
21/04/06  YOUTUBE AND THE WEINSTEIN COMPANY PREMIERE FIRST EIGHT MINUTES OF LUCKY NUMBER SLEVIN TO        Advertising
         PROMOTE NEW FILM
05/04/06 YOUTUBE UPLOADS $8M IN FUNDING                                                                   Funding
05/04/06 G4 AND YOUTUBE FORM STRATEGIC ALLIANCE, BEGINNING WITH EXCLUSIVE WORLD PREMIERE OF G4 “STAR      Partnership
         TREK 2.0” SHORT
04/06                                                                                                     Funding       YouTube réalise une levée de fond de 8 M$
28/03/06  E! AND YOUTUBE LOVE “CYBERSMACK”                                                                Partnership
14/02/06  YOUTUBE AND MATADOR RECORDS PREMIERE PRETTY GIRLS MAKE GRAVES “MAKE OUR VIDEO” CONTEST TO       Advertising
         PROMOTE NEW ALBUM
15/12/05 YOUTUBE OPENS INTERNET VIDEO TO THE MASSES                                                       Services
07/11/05 YOUTUBE RECEIVES $3.5M IN FUNDING FROM SEQUOIA CAPITAL                                           Funding
07/05                                                                                                     Market        MySpace racheté pour 580 M$ par News Corp




        20080126 - ed14 - Tetracolor - YouTube                                                     page 18 / 18

				
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