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[Take our poll: At $1.65 Billion, did YouTube sell too low?]

The answer is apparently not. In line with several media reports, search giant Google today announced that they have  reached a deal to buy the popular online video site for $1.65 billion in stock. "Google video is doing very well, but when we looked around in the marketplace, (YouTube) is a clear winner on the social networking side of video. That is really what drove us to acquire YouTube", says Sergey Brin, co-founder of Google during a conference call on Monday.

The New York Times reported this morning that separate board meetings at YouTube and Google were being held today. It seems like both companies were anxious to close this deal, because it was announced as early as Monday afternoon. As DMW reported this morning, the deal looked inevitable. Google has a mountain of cash and the new content deals that both Google and YouTube just disclosed demonstrate that copyright issues can and will be resolved. The only surprise was that there seemed to have been no bidding war and Google will pay with stock, not cash.

However, it seems unlikely that big media and technology companies like Microsoft, News Corp., Yahoo!, CBS, Viacom, and Disney have sat idly back and watched as one of the hottest companies on the Internet gets acquired by Google without trying to intervene.

After News Corp. snatched up MySpace in a last minute bidding war with Viacom last year, it would be strange if New Viacom, at a minimum, did not at least consider making a move in this space. After all, one of the reasons executive chairman Sumner Redstone had for firing Viacom’s former CEO, Tom Freston, was that he did not go after new media opportunities aggressively enough. You can read all about it in my story "As DMW Predicted - Redstone fires Freston" here. Several other companies, like Microsoft and Yahoo! and even Disney and News Corp., have probably meet with YouTube in the last few weeks.

But the result was not that YouTube became the subject of a bidding war that drove up the price tag higher than $1.65 billion. Trip Chowdhry, an analyst with Global Equities Research, told CNN this morning that he thought that YouTube may ultimately sell for a price between $3 billion and $5 billion: "The competition is probably also trying to put in counteroffers. That's the reason an acquisition will not occur at $1.6 billion," Chowdhry said to CNN. Now we know that he was wrong. We now also know that Internet veteran Mark Cuban was wrong when he said last week that "only a moron would buy YouTube" because of copyright issues. Clearly, the management team at Google are no morons. Read my story "Sorry Mark, But Prospective YouYube-Buyers Are Not Morons" here.

The problem with a bidding war is that Google is the last the company with whom one would want to bid against. Google has over $10 billion in cash and they need to spend it on growth companies like YouTube with large potential to validate their current valuation on the stock market. What’s more, Google has lagged behind in the social networking sector, with sites such as MySpace and YouTube gathering the lion’s share of traffic. I wrote in my analysis this morning that I suspected that Google was willing to go the extra distance to get their hands on YouTube and now it seems like they did not have to. There was no bidding war and Google was able to close the deal at $1.65 billion in cash.

As you can read in my latest Weekend Read here, YouTube would have been a good strategic fit for Microsoft too, as the tech-centric firm is trying to become more of a media company. News Corp. has said in earlier statements that they are not interested in YouTube and prefer to build up their own viral video service on MySpace. I would still not have counted them out.

Now, it is going to be really interesting to see what YouTube can become under Google's wings and what all the other big media companies, like News Corp and MySpace Video, will do to make sure that they are in the game for online video going forward.

Jay Baage
Senior Writer
Digital Media Wire