Zinger Key Points
- Google acquired YouTube in 2006, its largest purchase ever at the time.
- A look at how GOOG shares have performed since the acquisition.
In 2006, Google made the biggest acquisition in its history, which transformed the company. It's considered by many experts to be among the best acquisitions of all time.
What Happened: On Oct. 9, 2006, Google announced it was paying $1.65 billion in a stock-for-stock deal to acquire video platform YouTube, now one of its biggest revenue drivers.
“The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,” former Google CEO Eric Schmidt said at the time. “Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.”
Now operating under the Alphabet Inc GOOG GOOGL umbrella, YouTube has been an important piece to the success of the company.
In the last fiscal year, YouTube ads brought in $28.8 billion in revenue, out of the $257.6 billion total for the company, representing over 10% of company revenue.
In the most recently reported third quarter, YouTube generated $7.07 billion in revenue.
The YouTube segment has also increased Alphabet’s presence in the streaming market with an offering that includes its own videos and content from other media partners with YouTube TV. Alphabet also recently became the new partner of the National Football League for NFL Sunday Ticket, which could boost its television subscribers.
Until the 2007 acquisition of DoubleClick for $3.1 billion, the YouTube purchase was the biggest bet by the company. Alphabet has spent $2 billion or more on deals several times since the YouTube acquisition.
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Investing $1,000 in GOOG: Investors who liked the buyout of YouTube or saw the potential of Google’s growth with the video component being added have been pleasantly rewarded.
Shares of Google traded at $430 on the morning of Oct. 10, 2006, the day after the YouTube acquisition was announced.
A $1,000 investment in Google stock could have purchased 2.33 shares at the time. Google had a two-for-one stock split in 2014 that would have turned the investment into 4.66 shares. A 20-for-one split would have made the investment a total of 93.20 shares in 2022.
The 93.20 shares would be worth $8,633.12 today, based on a price of $92.63 for Alphabet shares at the time of writing.
This represents a hypothetical return of 763.3% over the last 16 years and 3 months. The investment in Google would have produced an average annual return of 47% over the last 16 years and 3 months.
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