It's been a wild ride for the startup founded in February 2005 in a Menlo Park, Calif., garage. YouTube announced its first round of funding the following November for $3.5 million from venture capital firm Sequoia Capital. In April 2006, the company received an additional $8 million in a second round of funding from Sequoia.
"The deal proves online video is a highly valued sector, and Google is confident it can monetize the enormous amount of traffic YouTube has today," said James Belcher, senior analyst eMarketer. "It's a nice switch from many deals done during the dot-com era, where the goal was to build traffic."
Today, Belcher said, the focus for companies turns to building traffic that can drive advertising dollars, which works well for entertainment industry executives trying to cope with a new supply chain that brings in multiple types of multimedia content like digital ringtones, music, and videos.
Thomas Hesse, president of Global Digital Business at Sony BMG Music Entertainment, declined to comment directly on the acquisition, but said the digital music group is pleased to have signed licensing deals with both Google and YouTube announced earlier Monday.