After being feted and wooed by the media world’s biggest players at investment bank Allen & Co.’s annual Sun Valley jamboree, YouTube CEO Chad Hurley might have contracted an inflated sense of his company’s worth.
That’s the scuttlebutt being promulgated by news tabloid The New York Post (owned, incidentally, by Rupert Murdoch’s News Corporation) in a column yesterday that suggested that Hurley his team of investors and executives at YouTube are aiming for a $1-billion-dollar market valuation, presumably via acquisition.
Howls of indignation followed publication of the column, with John Battelle suggesting that it is probably the mischievous media, not Hurley and company, that are promoting the $1-billion price tag. Battelle notes that the content with the greatest download popularity at YouTube is doubtless copyrighted, and that a major entertainment company would not risk acquiring YouTube for fear of stepping into a litigious quagmire. He also downplays the likelihood that a new-media powerhouse such as Google, Yahoo, and Microsoft would part with a $1 billion to won YouTube, though he believes Google probably would be the best fit, if it were so inclined.
Meanwhile, the folks at Techdirt believe that this is a media-manipulation ploy by YouTube — which sports negligible revenue along with $1-million-per-month bandwidth bills — to induce a major player to overpay for the privilege of owning the company. In this respect, Techdirt says, YouTube is emulating the approach Skype took in finding its buyer, eBay, which paid $4.1 billion after Skype had successively used the media to publicize an ever-increasing valuation that went from $1 billion to $3 billion before reaching its buyout price.
I think Post columnist is merely repeating what he heard from investment bankers and perhaps from News Corp. executives who returned from Sun Valley. I don’t believe that any major multibillion-dollar corporate concern, regardless of whether it is a new- or old-media company, can be persuaded by media hype to buy a company for an exorbitant price.
For all that’s been said about a Web 2.0 bubble, we haven’t gone back in time to 1999. Big companies are more discriminating about whey do with their money. The bust, and the long downturn that followed, still haunts us to this day, and it’s impossible for the "irrational exuberance" of that hyper-delusional era to return. eBay might have overpaid for Skype — though the jury is trying hard to withhold a definitive verdict — but if it did, it was because of faulty assumptions and flawed business-model methodologies, not because it was rendered mindless by a maelstrom of media hype.
I tend to agree with Battelle’s reasoning as to why YouTube isn’t worth $1 billion. Then again, to paraphrase NFL coach Bill Parcells, companies are worth what the market says they’re worth.