Remember when Google bought YouTube for 1.65 billion dollars? After the dot-com bust, many thought that this was a beginning of a new bubble – the web 2.0 bubble. Some thought – me included – that Google got it cheap. Mark Cuban called Google crazy for spending that much money on YouTube.

Today, we can get a clearer picture of why, exactly, Google had spent that kind of money on a video sharing site, and what their internal valuations were for YouTube. According to CNET, back in May, during a deposition given as part of the copyright lawsuit Viacom had filed against Google and YouTube, Google CEO Eric Schmidt estimated the value of YouTube somewhere between $600 million and $700 million.

Why, then, did Google decide to pay almost thrice that amount? It’s simple: if they hadn’t done it, someone else would. Here’s what Schmidt told Viacom’s attorney Stuart Jay Baskin:

“This is a company with very little revenue. (YouTube was) 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…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.”

So, was it worth it? As always, you can find analysts on both sides. James McQuivey from Forrester Research claims that the deal “ensures that these millions and millions of viewers are coming to a Google-owned site rather than someone’s else’s site” and that even “if it never makes its money back, its still going to be worth it.” On the other hand, research analyst Josh Martin claims that “it was a bad business decision for Google.”

From our perspective – and here at Mashable we focus on the users – it’s a no brainer. Three years after the deal, there’s only one important social video sharing site out there, and it’s YouTube. Somewhere along the line, YouTube may lose its luster, but as it stands right now, it’s one of Google’s most important assets, and that alone says a lot.

What do you think? Has Google overpaid for YouTube? Was it a good deal? Please share your thoughts in the comments.

Image courtesy of iStockphoto, tforgo

Tags: Google, youtube

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