Monday, October 09, 2006

Boob tube!

The much talked about Google - You Tube deal is here, with Google shelling out an insane $1.65 billion (thankfully, not cash!) for something that deserves much less. With so much idle cash in hand, it was just a matter of time before Google started doing bad deals. Though this wasn't a cash deal, it still shows some desperation on the part of the buyer. Is this the top of Bubble 2.0 or will there be more to come ?

This deal also marks an intersection of two bubbles - will this, and similar video/mobile/blog/wiki deals to come, save San Mateo real estate by minting millionaires overnight ? San Mateo has already seen year over year declines, and unless something dramatic (and positive) happens, is headed much lower.

The two who get left out now are CBS/Viacom and Yahoo. Losers unite! And they well may, as I speculated here.

For those looking to benefit from the hoped for surge in online video, I suggest reading an earlier post on increased bandwidth plays.

To that list I would add device makers like Logitech (LOGI), whose video cameras capture a good portion of those videos on You Tube and elsewhere, and content network providers/accelerators like VitalStream (VSTH). Akamai is another play, but looks extremely expensive right now; VitalStream on the other hand looks cheaper as a takeover target, even though much more riskier.

Update: Just 2 days after the initial post, VitalStream got a takeover offer from Internap! I do not own VitalStream shares as I am (was) still in the process of studying it. For Internap this is a good buy, and at a great price too, since VitalStream shares had just recently taken a hit, after warning about a possible loss of MySpace revenue. I do own Internap (INAP) shares, bought as a speculative play when they came very close to bankruptcy after the tech bust. Shares have since gone up 5 times, but I am still holding onto them, as I expect Internap itself to be ultimately swallowed by a telco/cable major. I had mentioned Internap in the earlier post on bandwidth plays.


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