Monday, December 04, 2006

Sell Google and Yahoo short

Yahoo is so inept that it's now pretty much impossible to put up a web site on their hosting system. No one uses the search engine anymore. Yahoo's auction company never posed a threat to eBay, its "clubs" are pretty much moribund, its email isn't as good as Google's Gmail. But Google is trying to unload as much cash as it can on losing companies. Take YouTube, a flavor-of-the-week company that would not have passed any serious attempt at due diligence:

In a move aimed at covering losses or potential claims by copyright holders against YouTube, Google has set aside 12.5% of the purchase price owed to YouTube to be paid out in a year. YouTube, the video-sharing site, was purchased by Google for 3.66 million shares of its prized stock, along with a convertible warrant. The amount of stock being held back by Google is worth more than $200 million USD. In a brief statement, Google stated that the stock was being withheld "to secure certain indemnification obligations".
The reserve suggests that Google is trying to protect against copyright infringement lawsuits. YouTube features both homemade and pirated videos. Although it has promptly removed pirated videos when requested to do so by copyright owners, questions have lingered as to its exposure to claims for distributing content owned by other media. YouTube never turned a profit, and required $15 million USD from Google to pay its bills until the deal closed. Now that its owner has 'deep pockets' it may become a more appealing target for copyright owners. However, under the Digital Millennium Copyright Act, YouTube should be safe from future lawsuits so long as it continues to respond to infringement complaints promptly.

1 comment:

Anonymous said...

Yahoo! used to be an industry leader. Now it spends all its time chasing everyone else. Google is big? Yahoo!'s strategic focus becomes (wait for the shocker) search engines.

You don't stay at the top of the heap chasing your competitors - you gotta lead! The old cliche about the Jack of All Trades comes to mind here...