- Tram Ho
15 years ago, Google bought YouTube for $1.65 billion. The date this news was officially announced was October 9, 2006. It seems like a small amount of money to buy a YouTube like today. But back then, the video site had only been around for less than two years – which meant that it was not a small amount of money even with its phenomenal growth rate.
Back then, there weren’t really any major video sites out there. However, when YouTube appeared, it created a huge wave with users, and that growth has not stopped to this day.
According to Britannica, the number of videos surpassed 25 million in March 2006, while YouTube’s inception was only in December 2005. A snapshot to today estimates that there are dozens. billion videos on this platform. That is exactly the “crazy” development!.
But the story gets even more interesting when reports say YouTube’s music service recently passed the 50 million paid subscriber mark. So all of this YouTube growth has everyone thinking: how good is this deal for Google? Logically, it’s a great investment, but exactly how much is this “bargain” worth?
To answer that, we’ll look at two metrics: YouTube’s annual revenue and its revenue contribution to Alphabet’s overall business. Then we’ll flip through the picture of the stock price chart for some clues to what lies ahead.
Google stock price has grown strongly in recent years.
First, let’s dive into YouTube’s annual revenue. In 2020 alone, the video sharing service brought in nearly $20 billion. This number stood at just over $8 billion in 2017.
Youtube’s ad revenue is witnessing tremendous growth (Source: Investopedia)
So, nearly 15 years after Google bought YouTube, Alphabet is seeing nearly 11 times that number in annual revenue. A great M&A deal!
Now let’s look at YouTube’s share of Alphabet’s revenue. In 2017, Alphabet had nearly $137 billion in revenue, so YouTube’s revenue is close to 6% of total revenue. But here’s the catch: YouTube represents nearly 11% of Alphabet’s $182 billion in revenue in 2020. YouTube has clearly fueled Alphabet’s growth.
Maybe this is one of the main reasons why Alphabet’s stock has been constantly peaking in recent times. The stock is up 259% since 2017. And this comes as big money flows into this stock. Companies that grow revenue and profits tend to attract smart investors. It’s no surprise that Alphabet stock is attractive enough to attract a large number of investors.
According to Investopedia
Source : Genk