Eric Schmidt said under oath that he overpaid for YouTube by about $1 billion just to blow away the competition.
CNET’s Greg Sandoval got a copy of Schmidt’s testimony before Viacom lawyers. In it, Schmidt says he thought YouTube was worth $600-$700 million but paid a premium to make sure Google had no challengers:
Schmidt: Sure, this is a company with very little revenue, growing quickly with user adoption, growing much faster than Google Video, which was the product that Google had. And they had indicated to us that they would be sold, and we believed that there would be a competing offer–because of who Google was–paying much more than they were worth. In the deal dynamics, the price, remember, is not set by my judgment or by financial model or discounted cash flow. It’s set by what people are willing to pay. And we ultimately concluded that $1.65 billion included a premium for moving quickly and making sure that we could participate in the user success in YouTube.
YouTube had little revenue to speak of when Google bought it, and an impending headache in the form of lawsuits. Just about any price could be construed as an overpayment.