Google Bought YouTube for $1.65 Billion in 2006. The Streaming Platform Is Now the Main Driver of a Roughly $93 Billion Business at Alphabet.
Key Points
Not only has YouTube's reach and revenue grown exponentially since Google bought it, but it has also become a leader in the entire content industry.
The world is moving toward short-form content, which YouTube has excelled in for decades.
YouTube generates revenues from sources beyond advertising.
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Most investors prefer companies to avoid making major acquisitions. Such deals are time-consuming, can destroy equity in the near term, and don't always end up being accretive enough to earnings to justify the upfront costs and the resources spent to integrate a new business into the buyer's ecosystem.
But if an acquisition is done right, it can be an absolute game-changer that takes a company to the next level. One of the best examples in history is arguably Google's $1.65 billion, all-stock purchase of YouTube in 2006. At the time, Google's market cap was only $130 billion, and streaming was still in its early days.
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Since then, YouTube has paid for itself many times over, and it's now the main driver of a nearly $93 billion business at Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), which became Google's parent company in 2015 in a corporate restructuring. And YouTube's growth shows no signs of slowing.
Image source: Getty Images.
YouTube was ahead of its time and remains the envy of the industry
Since 2006, the media business has changed in almost every way, whether you are looking at news, advertising, entertainment, social media, or even the specific types of content people consume.
Notably, people have shorter attention spans today, which is why short-form content has become king. YouTube started as a place for short-form content, and even though it now offers all kinds of content, it is still viewed as a dominant platform in that niche.
According to research firm Nielsen, YouTube had the largest market share in the streaming industry with 13.8% of viewing hours in June, while second-place Netflix had 7.9%.
Furthermore, according to the company's most recent earnings report, 1.7 billion unique viewers worldwide turned to the platform to watch World Cup videos during this year's tournament.
YouTube has also branched off into offering live television packages through YouTube TV, which offers an alternative to a traditional cable bundle.
The shifts in the media landscape have been so significant that major long-form streaming platforms now frequently cite YouTube as a competitor.
Through the first six months of this year, YouTube ads generated close to $21 billion in revenue. Furthermore, another revenue line item called Google subscriptions, platforms, and devices generated close to $25.3 billion.
That annualizes out to close to $93 billion this year. While the latter line item doesn't break down how much each specific revenue source contributes, YouTube is the dominant driver of this business.
The company's latest 10-Q stated that Google subscriptions, platforms, and devices include "consumer subscriptions, which primarily include revenues from YouTube services, such as YouTube TV, YouTube Music and Premium, and NFL Sunday Ticket, as well as Google One..."
These businesses are continuing to grow well. In the first half of 2026, YouTube ads grew 12% year over year, while subscriptions, platforms, and devices grew 17%.
"We continue to see a lot of momentum in the living room," Google Chief Business Officer Philipp Schindler said on Alphabet's most recent earnings call. "We have a really exciting ads roadmap as well ahead of us on the brand side, on the direct response side. Demand gen and shorts remain really interesting opportunities here."
An acquisition for the ages
Google's purchase of YouTube back in the day shows just how powerful an acquisition can be when executed correctly.
The key in this case was spotting what the future of media would look like well before that vision became reality, which required considerable due diligence and some luck. However, YouTube is as well positioned as any streaming platform to take advantage of whatever comes next. It has become a go-to platform for short-form content, creative skits, do-it-yourself tutorials, and even long-form, as media companies and individuals realize they can get a lot of views and make a lot of money by publishing their videos on the platform.
While that $1.65 billion price tag likely sounded like a lot in 2006, it looks like peanuts for the business that YouTube has become.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Netflix. The Motley Fool has a disclosure policy.
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