Google to buy YouTube for $1.65 billion

YouTube will operate independently and the companies will work together on building new features.

Google has agreed to purchase online video phenomenon YouTube for $1.65 billion in stock, the companies announced Monday after the close of the stock market.

The deal, which had , will dramatically improve Google's video-sharing service with one of the Internet's hottest properties in YouTube, which allows Net users to upload video clips and share them with the world, for better or worse. YouTube will operate independently, and the companies will work together on building new features for independent users as well as for aspiring directors, they said in a press release. The deal is expected to close in the fourth quarter of 2006.

Google's acquisition of YouTube comes as online video is really starting to hit its stride. As more and more people have signed up for broadband Internet connections and the technology behind video-sharing services has improved, traffic to YouTube's site has skyrocketed. Users have made a very big deal of uploading videos of themselves, sharing the minute details of their lives, dancing to popular music or, more controversially, essentially rebroadcasting clips of popular television shows.

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YouTube: Google's biggest buy
After announcing a $1.65 billion purchase, Google CEO Eric Schmidt and YouTube CEO Chad Hurley look forward to what the combined company can do.

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One early example of the phenomenon was the frenzy around the comic "Lazy Sunday" video, pulled from an airing of "Saturday Night Live." NBC first demanded that YouTube pull the sketch from its site after people flocked to the hilarious rap song, which featured two mild-mannered "SNL" cast members afflecting gangsta-rap personas while recalling a trip to the movies to see "The Chronicles of Narnia." But YouTube later cut a deal with NBC to allow YouTube users to post content from NBC programs, and it has followed up that deal with others involving companies such as Warner Music and on Monday, Universal Music Group, Sony BMG Music Entertainment and CBS. Still, the issue of .

Around 100 million videos are available on YouTube on a given day, with 65,000 new videos added every day, according to the company's Web site. It cited numbers from Nielsen Net Ratings in claiming 20 million unique visitors a month.

Sequoia Partners provided the original funding of $3.5 million in November 2005, and followed that up with a second $8 million round of funding in April.

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