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I was working at Google when they bought YouTube for nearly $2B, the by far largest purchase at the time. That is week's TGIF had incredulous engineers questio

I was working at Google when they bought YouTube for nearly $2B, the by far largest purchase at the time. That is week's TGIF had incredulous engineers questioning the decision, and Larry explaining that it was indeed steep, but that he saw incredible potential. He was right yet again.

rileymat2 6y ago
Were the objections about the size of the opportunity or whether they could have out competed it with Google Video at a fraction of the cost?
- coding123 6y ago
  They had a very strong engineering mindset - how many times have you seen in HN about how someone can write an Uber in a few weekends and literally replace Uber. We tend to think it's about the codebase, but it's not. The market position isn't gained by writing a loop and displaying content you're storing. It's literally 0.00001% of the total cost of acquiring customers.
chaos_a 6y ago
Same with android, bought for $50M and is now one of the most used operating system globally. https://venturebeat.com/2010/10/27/google-exec-android-was-best-deal-ever/ https://venturebeat.com/2010/10/27/google-exec-android-was-b...
- coryrc 6y ago
  Hasn't it made Microsoft more money than Google?
  - skj 6y ago
    I don't know, but if so, is that relevant? The question was whether or not it was a good deal for Google. It's not zero-sum.
    - coryrc 6y ago
      Your argument was it was a good expense because it is popular, yet an uninvolved company is making more, so perhaps the purchase was unnecessary.
  - sangnoir 6y ago
    How Microsoft made money from Android is quite interesting, and very ORACLE-like: Microsoft went around threatening OEM companies to pay up for a bag of patents it claimed Android infringed, but wouldn't publicly disclose which patents those were. Meaning OEMs couldn't create work-arounds. The mobile IP-wars were something.
coding123 6y ago
I remember that too. I remember at the time that everyone was worried Google was going to start adding ads. And they did it so soo sooo slowly. They did it so slowly that even today they haven't been able to do a 30 second forced spot yet, like TV. It's interesting actually, someone should write a book about the way they introduced ads on YT. They did it so carefully that you could tell they were very very carefully balancing not having any protest greater than a few hundred people at any time. That was essentially the major reason people thought it was a bad deal - that you couldn't monetize because people would run to the next platform, I mean it was essentially a doomed business idea because the belief was you couldn't get the advertising dollar above the storage and staffing costs.
- kypro 6y ago
  As someone who's been using ad blockers for years and was watching YouTube a long time before ads, it was quite a painful experience suddenly having ads pop up on every video when I started using YouTube on my tablet. This isn't just YouTube though, the internet as a whole has slowly shifted in the direction of more ads and more pay walls. I get it, but as someone who vividly remembers the internet before ads and pay walls I still find it odd how people growing up online today just seem to accept it.
  - xenocratus 6y ago
    > but as someone who vividly remembers the internet before ads and pay walls I still find it odd how people growing up online today just seem to accept it. I find this odd - you're saying that you're only fond of the way things were when you grew up, but that it's odd how people growing up now accept their own reality?
    - kortilla 6y ago
      It’s not just that it’s different, it’s worse. The Internet in the early 2000s was a magical time of unsustainable sharing. So it’s not just older == better. The early 90s and before were all shit for video and being bombarded with ads as well.
vl 6y ago
Also it’s interesting that Google is the only company (except, perhaps, Amazon), that could pull off running and growing YT. YT is strongly subsidized by getting cost reduction by using shared Google infrastructure. Also billions of dollars where spent for years to support YT without return in sight. Probably the longest, or, at least, biggest, “eventually we’ll corner the market and make it profitable” scheme.
- tpmx 6y ago
  Yeah. My impression from the outside: It's largely been the advertising people/tech that has made Youtube profitable. Not infrastructure effectiveness. (Sure, I imagine infra cost effectiveness was very important during a few key growth years pre-acquisition.)
  - vl 6y ago
    My point is more nuanced: YT is worth so much because it is a monopoly. To make it monopoly it is today, Google had to have: extremely deep pockets, efficient infrastructure. Very few other companies could have accomplished that.
    - tpmx 6y ago
      Okay, agreed.
    - lokar 6y ago
      AIUI, they had to sell. There was no way they could build out the needed infra to maintain the growth rate another year, let alone pay for it.
      - xref 6y ago
        I thought they had to sell YT because they were starting to get sued into the ground because it was mainly hosting SNL and South Park clips at the time
jeffbee 6y ago
The TGIF doubters were eventually right about later, even more expensive acquisitions that did not pan out, like Nest.
- paulie_a 6y ago
  What didnt work out with nest?
  - jeffbee 6y ago
    Google bought it for $3.2 billion and I doubt it's worth even that much today, certainly not 100x that much like YouTube. It was rumored that Alphabet tried to sell it in 2016 and couldn't find a buyer.
    - paulie_a 6y ago
      I would have guess it was a success, but not like youtube. Plus with their push on everything is nest, it seems like they are betting on that as a solid competitor I loved having a nest thermostat and will definitely buy one for my next place

rileymat2 6y ago

Were the objections about the size of the opportunity or whether they could have out competed it with Google Video at a fraction of the cost?

coding123 6y ago
They had a very strong engineering mindset - how many times have you seen in HN about how someone can write an Uber in a few weekends and literally replace Uber. We tend to think it's about the codebase, but it's not. The market position isn't gained by writing a loop and displaying content you're storing. It's literally 0.00001% of the total cost of acquiring customers.

chaos_a 6y ago

Same with android, bought for $50M and is now one of the most used operating system globally. https://venturebeat.com/2010/10/27/google-exec-android-was-best-deal-ever/ https://venturebeat.com/2010/10/27/google-exec-android-was-b...

coryrc 6y ago
Hasn't it made Microsoft more money than Google?
- skj 6y ago
  I don't know, but if so, is that relevant? The question was whether or not it was a good deal for Google. It's not zero-sum.
  - coryrc 6y ago
    Your argument was it was a good expense because it is popular, yet an uninvolved company is making more, so perhaps the purchase was unnecessary.
- sangnoir 6y ago
  How Microsoft made money from Android is quite interesting, and very ORACLE-like: Microsoft went around threatening OEM companies to pay up for a bag of patents it claimed Android infringed, but wouldn't publicly disclose which patents those were. Meaning OEMs couldn't create work-arounds. The mobile IP-wars were something.

coding123 6y ago

I remember that too. I remember at the time that everyone was worried Google was going to start adding ads. And they did it so soo sooo slowly. They did it so slowly that even today they haven't been able to do a 30 second forced spot yet, like TV. It's interesting actually, someone should write a book about the way they introduced ads on YT. They did it so carefully that you could tell they were very very carefully balancing not having any protest greater than a few hundred people at any time. That was essentially the major reason people thought it was a bad deal - that you couldn't monetize because people would run to the next platform, I mean it was essentially a doomed business idea because the belief was you couldn't get the advertising dollar above the storage and staffing costs.

kypro 6y ago
As someone who's been using ad blockers for years and was watching YouTube a long time before ads, it was quite a painful experience suddenly having ads pop up on every video when I started using YouTube on my tablet. This isn't just YouTube though, the internet as a whole has slowly shifted in the direction of more ads and more pay walls. I get it, but as someone who vividly remembers the internet before ads and pay walls I still find it odd how people growing up online today just seem to accept it.
- xenocratus 6y ago
  > but as someone who vividly remembers the internet before ads and pay walls I still find it odd how people growing up online today just seem to accept it. I find this odd - you're saying that you're only fond of the way things were when you grew up, but that it's odd how people growing up now accept their own reality?
  - kortilla 6y ago
    It’s not just that it’s different, it’s worse. The Internet in the early 2000s was a magical time of unsustainable sharing. So it’s not just older == better. The early 90s and before were all shit for video and being bombarded with ads as well.

vl 6y ago

Also it’s interesting that Google is the only company (except, perhaps, Amazon), that could pull off running and growing YT. YT is strongly subsidized by getting cost reduction by using shared Google infrastructure. Also billions of dollars where spent for years to support YT without return in sight. Probably the longest, or, at least, biggest, “eventually we’ll corner the market and make it profitable” scheme.

tpmx 6y ago
Yeah. My impression from the outside: It's largely been the advertising people/tech that has made Youtube profitable. Not infrastructure effectiveness. (Sure, I imagine infra cost effectiveness was very important during a few key growth years pre-acquisition.)
- vl 6y ago
  My point is more nuanced: YT is worth so much because it is a monopoly. To make it monopoly it is today, Google had to have: extremely deep pockets, efficient infrastructure. Very few other companies could have accomplished that.
  - tpmx 6y ago
    Okay, agreed.
  - lokar 6y ago
    AIUI, they had to sell. There was no way they could build out the needed infra to maintain the growth rate another year, let alone pay for it.
    - xref 6y ago
      I thought they had to sell YT because they were starting to get sued into the ground because it was mainly hosting SNL and South Park clips at the time

jeffbee 6y ago

The TGIF doubters were eventually right about later, even more expensive acquisitions that did not pan out, like Nest.

paulie_a 6y ago
What didnt work out with nest?
- jeffbee 6y ago
  Google bought it for $3.2 billion and I doubt it's worth even that much today, certainly not 100x that much like YouTube. It was rumored that Alphabet tried to sell it in 2016 and couldn't find a buyer.
  - paulie_a 6y ago
    I would have guess it was a success, but not like youtube. Plus with their push on everything is nest, it seems like they are betting on that as a solid competitor I loved having a nest thermostat and will definitely buy one for my next place