Sony Pictures is announcing the acquisition of online video startup Grouper tonight, Tuesday, at midnight EST. The acquisition price, confirmed by Grouper, was $65 million in cash. Our previous coverage of Grouper is here.
Sausalito, California based Grouper has built three key technologies: an online video sharing site, a desktop video editor and most importantly a closed (non-bittorent) P2P network for distributing media. Michael
Arrington called Grouper Version 2 a “near perfect product” when he reviewed it at launch in December. The company reports that it had 8 million unique users last month (which, unsurprisingly, conflicts completely with Comscore data discussed below). Grouper was backed by $5.25 million in funding, largely from Deutche Telecom’s T-Online.
Sony says they will use Grouper’s technology to share lower quality Sony videos online, distribute DVD quality video by P2P and allow users to create mashups of select Sony media properties. Grouper says the P2P network took the company two years to build. The fact that Sony is strong in both content and hardware made Grouper more interesting than other video startups, though company President Josh Felser told me that several studios were interested in an acquisition. Prior to being CEO of Grouper, Felser was the President of Spinner.com, acquired by AOL for $320 million in 1999.
It’s obvious that online video is hot right now. Major companies have been making distribution deals and launching their own download services.
However, the Grouper acquisition price is out of whack when compared to other recent video acquisitions. US Comscore data says Grouper had about 542,000 unique visitors in July 2006, compared to YouTube’s 16 million. Viacom’s recent acquisitions of iFilm (December 2005, 3.3 million U.S. uniques) and Atom/Shockwave (August 2006, 1.3 million U.S. uniques) for $50 million and $200 million, respectively suggest a per-unique-visitor valuation of $15-$20. Grouper’s per-unique-visitor valuation, by comparision, is roughly $70 – $120, depending on whether you look at June or July 2006 data.
It’s hard to use Comscore data for meaningful analysis as it doesn’t necessarily reflect total videos uploaded or viewed, and doesn’t reflect videos embedded on third party sites. I also only have U.S. Comscore data. However, noting those issues, the $65 million valuation on Grouper suggests a YouTube valuation of around $2 billion.
Of course, it looks like Sony was most attracted to Grouper’s P2P technology for movie distribution, meaning YouTube comparisons are inappropriate. $65 million is still a lot to pay, however, and bittorent, as well as services like Red Swoosh (covered here), are proven and effective means of moving large amounts of data over the Internet.
“Michael Arrington called Grouper Version 2 a “near perfect product” when he reviewed it at launch in December.”
Hey, is that Michael Arrington the same as… well, yourself?
no…sorry. Marshall is on a plane and I was posting this for him. Author is now correct.
I supposed that was the case. Thanks for your prompt fix.
Don’t follow your per visitor valuation logic in this case – this aquisition seems to be based on SONY wanting to ramp up quickly with *technology*, not traffic. I doubt the site traffic was of much importance to them, rather they felt this was the superior video infrastructure for them to build on.
Sorry – you qualified this in the last paragraph which I read too sloppily…
Nice deal! I would like to know how Sony has come up with that valuation number.
yeah..I doubt their traffic has anything at all to do with Sony’s valuation of the deal. Half this post doesn’t even make sense.
One fault with your post: “yet to be launched” peer to peer network? Grouper launched the peer to peer network well over 2 years ago. The web based video sharing site is rather new in comparison. Video websites are easily deployed.. i.e. youtube and “me too” sites. A peer to peer network is not built in a weekend. Good luck to the other players in the video space now.
“Prior to being CEO of Grouper, Felser was the President of Spinner.com, acquired by AOL for $320 million in 1999.”
JEEZ. This guy must have cashed in for millions across the two companies.
hi my friend.
Nowadays, nothing Sony does makes sense.
LifeTime Gamer is going for $55(Million)… If we get a Saturday afternoon cartoon show then maybe $85(Million)… Animated Series then $400(Million)… And if I write all the music, who knows… hehehe…
Strange world we live in these days…
Forgot to say… Those Figures are *Mine & Mine Alone*… Just like all the other crap out there…
Strange from the press release:
“CULVER CITY, CA (August 23, 2006) – Sony Pictures Entertainment (SPE) has acquired Grouper, the fast growing user-generated video site on the Internet…
Grouper.com, which is the second largest independent video community, enables its members to watch, share and create video on the Web.”
Anyone heard of vidiLife? There was an article on it in Business Week towards the end of last year, it’s also a video community. Anyway, check out this Alexa comparison:
http://www.alex...url=grouper.com
Not only does vidiLife appear larger, it appears to be growing faster following a fairly flat period for both sites.
I wonder where these supposed facts of “8 million uniques”, “fastest growing”, and “second largest” come from? I’d love to know!
*shrug*
Wow this is happening one more time. But this time its much more interesting since the big guys are snapping up anything remotely interesting plus the weight of the previous bubble. Cant wait to see how this will play out when the rest of the blogocrap goes public.
Even more interesting how the thing that started it all – blogs or better to say blog owners will perform in this climate. i bet not very good since original blog idea is dead. And a copy cat stolen from the good old internet xxx empire is growing. Well of coarse its faster to grow sideways but I think you forgot blogs are nothing like xxx people will lose attention if you keep up this blogocrap. Would be nice to see how premium blog traffic is sold for cents on a dollar maybe even buy it. But this is all one or two years in the future which is not bad.
And can you tell me whats up with this computer generated comments on the blogocrap that you pushing. At least hire some writers. Oops you did. Hire more then.
500k users is to 16 million users as $65 million is to $2 billion valuation
Sorry, let youtube put up some revenue numbers before assigning absurd valuations based on A to B. Remember, every video youtube serves costs them money.
Mike, of course, I would encourage you to start shopping techcrunch based on those eyeball valuations immediately
However, noting those issues, the $65 million valuation on Grouper suggests a YouTube valuation of around $2 billion.
This is pretty stupid. First, as you admit, your stats are weak. Second, there’s no reason to think that per-unique-visitor valuation scales linearly. Third, there’s no reason to think that Sony is interested in Grouper’s brand or audience. Do you really think they’d be interested in leveraging the awesome buzz around the Grouper name to make people more aware of Sony’s collection of obscure arthouse flicks?
Right now YouTube consists of a great brand, an impressive hosting platform, a money-losing business plan and a copy of Flash 8. And that’s pretty much it. Grouper’s a much weaker brand, but brings actual, potentially-valuable technology to the table.
Prospective buyers for the two companies will be looking for very different things. There’s no reason to think that their valuations can be easily compared just because they both deal in video — at least, no more than it makes sense to compare the sale price of Memorex and Warner Bros. because they both sell videotapes.
The exit was almost certainly competitive, as the posting notes, which is what a skillfull CEO (and team) does to maximize valuation.
The upper range for a technology acquisition is ~$70 million. Above that, companies are generally valued based on some multiple of revenue (or eyeballs, or whatever), and the next ‘range’ starts at about $150 million.
So they pretty well maxed out the potential return, given the amount they’d raised. Nicely done, as an investment.
“Grouper.com, which is the **second largest** independent video community, enables its members to watch, share and create video on the Web.”
At Half a Million? Hardly. Vidiac.com is doing 4 Million Unique Visitors a Month. Of course their Alexa is very hard to nail down as they don’t have a centralized website. But check out sites like videos.streetfire.net and freevideoblog.com, and hundreds of others that Vidiac powers.
Grouper was a small video player, Sony’s valuation was based on technology not traffic.
tom – if you just changed “This is pretty stupid” to “I disagree strongly with your logic” the entire tone of your comment goes from trolling and hateful to intelligent and valuable.
dude – how much are Arrington’s ratings worth? maybe we can start an online market for them?
Here’s my guess:
“perfect ” – $2 million, 30% of sale price, and 1st-born child (and your dog)
“near perfect” – $10 million and 10% of sale price
“good” – $2 million
“average” – $500k (for traffic/beta testers/potential snowball-effect)
“crap” – $100k (sometimes the only way to inspire your dev team)
“not completely shite” – lunch (free if you advertise on TechEmpire)
“tom – if you just changed “This is pretty stupid” to “I disagree strongly with your logic” the entire tone of your comment goes from trolling and hateful to intelligent and valuable. ”
But calling people asshole in a title is nice?
What a fake you are.
Pretending to be nice and being an asshole is worse than being an admitted asshole in my book.
And he is right, your evaluation of YouTube is STUPID
Where are all the morons talking about how Digg could never get a $200mm valuation? Pressing sour grapes into ‘37 whine?
Hi,
No one seems to have cottoned onto the fact this has hardly anything to do with the typical studio play.
Way more to do with Sony cloning Microsoft and its’ X-box Live with Video.
The PS3 will essentially be a [not dumb] terminal with a high-class CPU, Hard-drive, Network Access.
Each Playstation version has sold about 100million units each; add a Blu-ray player to a console for the same price of a stand-alone player (see: Microsoft/Trojan-Horse/Nuon), and they’ll sell a lot more PS3 than previous versions.
More seeds, more content, more users, more efficiency. Network-Effect.
Kind regards,
Shakir Razak
I’m not sure the math is correct here for Viacom’s acquisition of Atom/Shockwave. $200M/1.3M is $153 per unique visitor valuation NOT $15-20 range. Michael, are your numbers correct?
Businessweek: Online Video: Tasty Takeover Targets?
http://www.busi...oss+top+stories
The big difference in the unique visitor numbers is US vs. worldwide. Grouper is getting a ton of unique visitors from its partnership with Friendster which is mostly in Asia. It does not surprise me that they only have half a million uniques in the US. Sony blew it bigtime on this one, let’s hope others don’t follow suit. This acquisition will be as valuable to Sony as the Spinner acquisition was to AOL – near zero.
Stupid Google, bought YouTube.com for $1.6 billion dollars. I guess their employees at Google Video must be kicking their chairs (or whatever) now.
1.6 Billion dollars. That is a lot of money. Is a piece of s/w and its users worth so much?
1, 6 0 0 ,0 0 0, 0 0 0 dollars = Nearly a Billion Starbucks coffee drinks.
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good