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Paper: Google in talks to acquire YouTube

SAN FRANCISCO - Internet search leader Google Inc. is in talks to acquire the popular online video site YouTube Inc. for about $1.6 billion, The Wall Street Journal reported Friday, citing a person familiar with the matter.

Mountain View-based Google and San Mateo-based YouTube are still at a sensitive stage in the discussion, the newspaper reported on its Web site.

The blog TechCrunch had reported on rumors of the acquisition talks. Google and YouTube officials declined comment.

Analysts said a Google acquisition of YouTube would make sense for both companies if the reported talks lead to a deal, especially considering Google's $10 billion in cash on hand.

''It's d--- cheap for a company that already has a global presence,'' said Trip Chowdhry, an analyst with the San Francisco-based Global Equities Research. ''YouTube's brand identity is no less than Google's and is no less than Coke's.''

As YouTube's popularity continues to soar, she said, Google can help make sure the site's infrastructure can keep pace.

The acquisition would also immediately propel Google to the top of the online video heap. YouTube eclipsed traffic on Google's video site in February. By July, about 30.5 million people visited YouTube, compared with 9.3 million to Google Video and 5.3 million to Yahoo Inc.'s Yahoo Video, according to Nielsen/NetRatings.

YouTube users watch more that 100 million videos daily.

Google's video service lets everyday users post clips, too, and unlike YouTube, Google also gives them the choice of selling video. All YouTube clips are free.

YouTube was founded in February 2005 by three former employees of eBay Inc.'s PayPal electronic-payment unit, and its chief financial backer is the Silicon Valley venture capital firm Sequoia Capital, which has invested $11.5 million. Sequoia was also an early Google investor.

The 25-employee YouTube is surging, thanks to the increased availability of high-speed Internet connections and gadgets such as camera phones and digital cameras capable of taking video. Most of YouTube offerings are short amateur clips, although professional filmmakers, television networks and even political campaigns have posted materials.

But many of the site's videos contain copyrighted material, putting it at odds with big media companies such as Universal Music Group. YouTube immediately removes videos when copyright holders complain, but analysts said the company is still in a precarious legal position.

''Google would be taking on all that liability,'' Forrester Research analyst Josh Bernoff said.

But Google also could present a solution, Bernoff said, noting that the software innovator could develop automated systems to block attempts to post copyrighted materials. He also said Google's size and clout gives the company much more leverage than YouTube to negotiate deals with copyright holders.

When rumors circulated earlier this year that some major media companies were interested in buying YouTube, the company's chief executive, Chad Hurley, said the company was not for sale and a future initial public offering was possible.

Shares in Google rose $8.69, or 2.11 percent, to close at $420.50 Friday on the Nasdaq Stock Market.