The untold story of Google’s $1.65 billion acquisition of YouTube, from those who lived it (GOOG, GOOGL)

The untold story of Google’s $1.65 billion acquisition of YouTube, from those who lived it (GOOG, GOOGL)

youtube 15th anniversary beginnings google acquisition 2x1

youtube 15th anniversary beginnings google acquisition 2x1

From left: YouTube founders Steve Chen, Chad Hurley, and Jawed Karim; Google cofounder Larry Page, former Google CEO Eric Schmidt, and Google cofounder Sergey Brin.

Noah Berger/AP Picture; YouTube; Paul Sakuma/AP Picture; Samantha Lee/Business Insider.


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  • YouTube’s sale to Google for $1.
  • In honor of YouTube’s 15 th anniversary, Service Expert spoke with early employees, investors, and creators about the whirlwind 18 months of YouTube’s life as an independent business.
  • From the day YouTube decided to offer to the day the offer was announced was a matter of weeks.

    The officer called Yu over to his cars and truck.

    Drummond and Yu, still shaking from the experience, signed the documents and went home, their particular companies celebrating for various reasons.

    The little group– led by cofounders Steve Chen, YouTube’s chief technology officer, and Chad Hurley, the business’s CEO– was having a hard time to keep up with demand.

    ” It was quite balls to the wall, I guess you would state.

    Gideon Yu, who signed up with as CFO in September 2006, keeps in mind the team asking everyone they knew for access to server area.

    YouTube's first HQ

    YouTube’s very first head office was above Amici’s East Coast Pizzeria in San Mateo, California.

    Katie Canales/Business Expert.


    On top of that, YouTube was scrambling to prevent being seen as another Napster-like business

    ” The creators did not intend it to be a location for pirated material,” according to Roelof Botha, who had actually worked with the YouTube creators years earlier at PayPal and pressed his company, Sequoia Capital, to invest in YouTube.

    Zahavah Levine, YouTube’s general counsel and VP of company affairs, remembers feeling like YouTube could not keep up.

    ” We were doing the best we could,” Yu, the CFO, said.

    3rd Ave Sports Bar

    3rd Opportunity Sports Bar, directly next door to YouTube’s first office.

    Katie Canales/Business Expert.


    One afternoon, the company had a controversial conference with Universal Music, which was being “very, extremely aggressive” with YouTube in marking copyright violations of its music, according to Botha. Later on that day, Chen and Hurley made their method to the bar next door to the YouTube workplace, 3rd Opportunity Sports Bar, where they would in some cases go at night to have conversations about the company. They had taken a walk around the block in San Mateo and decided. At the bar, they told Yu they wished to offer.

    The way Yu tells it, both Chen and Hurley were irritated by the amount of conferences the business was having about copyright violation, meetings that were ending up being progressively hostile. They informed Yu that they had begun YouTube to make an excellent item. This wasn’t what they signed up for.

    The group talked about whether it made sense to seek to larger business for an acquisition, companies who had the resources to work out offers and resolve infrastructure concerns– a company with the “actually blunt instrument” of a great deal of individuals and a lot of cash, Yu said.

    After talking to YouTube’s board and its financiers, everyone agreed: it was time to progress with an acquisition.

    The bidding war

    YouTube’s acquisition took just about three weeks after that night at the sports bar, Yu said.

    While the bidding war for YouTube was said to involve nearly a half-dozen players, including Microsoft, Viacom, and News Corp., at the end of the day, there were actually only 2 contenders: Yahoo and Google.

    ” The bidding war was in fact a really little and tight bidding war,” Yu stated. “We wanted to keep details flow very tight, decrease the possibilities of leakages. The minute we got rights holders and other folks involved in that kind of a circus, it might have ended a lot more inadequately for YouTube than it wound up ending.”

    Neither Chen nor Hurley originated from finance backgrounds, and turned to their investors at Sequoia for guidance on how to work out the terms of the offer.

    ” We used to have a pizza dinner at my place here, at our home in the dining room. We would all relax our table, and Roelof Botha was in charge of getting the pizza,” Pierre Lamond, a previous partner at Sequoia, stated. “It was clear to both Yahoo and Google that we had a special item, that it would be very challenging to take on. We had the tailwind already.”

    Yu, who had been Yahoo’s treasurer prior to signing up with YouTube, stated he called his old associates and told them they had an opportunity to purchase YouTube. However if Yahoo was interested, it needed to establish a meeting right away.

    What followed sounds like Silicon Valley tradition, however it’s been well-documented: Since the YouTube founders had actually become so popular in Silicon Valley, they had to pick a meeting place no one would discover. They picked a Denny’s in Redwood City, a 14- minute drive from YouTube’s offices.

    On the very first day, Hurley and Chen satisfied Google’s Larry Page and Eric Schmidt there. The next, executives from Yahoo. (Chen informed journalist Sarah Lacy at TechCrunch Disrupt in 2011 that he ordered the mozzarella sticks.)

    Denny's Redwood City

    The Denny’s in Redwood City, California.

    Katie Canales/Business Expert.


    Quickly, Google made an offer.

    Meanwhile, YouTube had been working on offers of its own with the music labels in hopes of preventing costly copyright lawsuits.

    Levine stated she essentially moved into the law firm they were working with at the time.

    ” I lived in San Francisco, however I could not even pay for the time to go back and forth in between Palo Alto and San Francisco,” Levine said.

    As if there weren’t currently enough moving parts, YouTube had actually outgrown its San Mateo workplace and was planning a move to San Bruno.

    Denny's parking lot Redwood City

    The Denny’s car park in Redwood City, California.

    Katie Canales/Business Expert.

    By early October, YouTube was close to signing an offer– however not with Google. YouTube had a meeting on the books with Yahoo for a full day of due diligence, and the plan was to sign a term sheet for an acquisition at the end of the day, according to Yu.

    ” We put Yahoo on the ‘back-burner’ while we pressed Google for a greater rate,” Lamond stated.

    The YouTube team proposed $1.

    Google agreed to the rate, and YouTube said it was prepared to do the offer.

    Yahoo decreased to comment on its involvement in YouTube’s sale.

    ‘ It was all on adrenaline’

    YouTube second HQ

    YouTube’s 2nd headquarters in San Bruno, California.

    Katie Canales/Business Expert.


    From the day the term sheet was signed to the day the offer was announced was a matter of days– Chen approximates it was five, Levine and Yu both pegged it at about a week.

    ” I think what made it even more poignant for numerous of us was that the competitors for YouTube at the time was Google Video,” Byrne stated.

    While some YouTube employees were in-the-know about the acquisition, others, like Misty Ewing-Davis, a material mediator, weren’t clued in.

    ” I make certain if anyone has photos from that day, all of us just appear like slobs,” Ewing-Davis stated. “Nobody expected that.”

    Byrne keeps in mind the team writing and tape-recording a brief video that Hurley and Chen ended up shooting outdoors in the car park that day, the red and white striped awning of TGI Fridays visible in the background.

    In the video, a plainly giddy Hurley and Chen, worn blazers, announced the sale and thanked the community of developers.

    ” We’re going to stay committed to developing the best service for you, establishing the most ingenious service and tools and technologies so you can keep having fun on our website,” Hurley said.

    A ‘quite big step up’

    Life remained mostly the same for the YouTube crew after the acquisition was completed in November. YouTube was– and remains to this day– in a separate workplace in San Bruno.

    Chen left YouTube for Google in 2009, and moved on from the business two years later. Hurley stayed on as CEO till 2010, when Google’s Salar Kamangar took over. Chen states he and Hurley had “currently been discussing doing something else together,” and they collaborate in 2011 to introduce a web company called AVOS Systems.

    The majority of the early YouTube staff members saw only minor modifications to their life, especially at first. Google added its mini convenience-stores to YouTube’s office, where staff members could access as lots of totally free packs of gum and soft drinks as they desired. Yu Pan, YouTube’s employee No. 1, observed that the business celebrations improved. The day after the acquisition was revealed, the staff got to have actually a catered lunch of Train sandwiches, according to Gideon Yu.

    ” We were snacking on Cup of Noodles and things at the old office,” he said. “Pretty big step up.”

    YouTube current HQ

    YouTube’s current headquarters in San Bruno, California.

    Katie Canales/Business Expert.


    But Google had assured to let YouTube keep doing what it was doing, to stay hands-off and let it grow, and to keep fostering the community of creators YouTube had actually developed. It kept that pledge.

    ” You always hear these headache stories of incorporated business, but that wasn’t the case for us,” stated Kevin Donahue, YouTube’s vice president of material at the time.

    Even under the brand-new ownership of a tech giant, Chen and Hurley had control. They shared an office, from which they entrusted jobs to newfound hoards of employees that originated from Google. As long as they might deliver the guaranteed traffic showing YouTube’s monumental growth, they had state over the decision-making, Chen said.

    The greatest concern to the group was presenting YouTube and Google Video as a joined front moving forward.

    ” It resembled shaking hands with our most significant enemy and now we were being required to be allies,” Chen said. “It sounds awkward initially, however it was just the Google Video and YouTube groups being combined together.”

    Eventually, as holds true with almost every start-up that is able to grow or become obtained, the dynamic moved. YouTube began to feel less like a small, close-knit household and more like what it eventually ended up being: a multi-billion-dollar service housed inside one of the most significant business on the planet.

    Botha, the Sequoia partner who served on YouTube’s board, remembers strolling into YouTube’s workplace days after the offer was announced. After a year of getting to know everybody on a first-name basis, he states he was stunned to see brand-new faces staring back at him.

    ” I walk in, and they had actually changed everyone. They had a brand-new front desk individual,” Botha stated. “I felt like a total outsider, I was so shocked. It was clear at that point: It was Google’s business.”

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