Google's Schmidt on M&A

Silicon Alley Insider ran an interesting piece today that quoted Credit Suisse analysts Kenneth Sena and Spencer Wang estimating that Youtube will lose nearly $470mm in 2009. The article went on to highlight Eric Schmidt saying that, 'going forward, GOOG will be more careful with potential large expense streams, which are of uncertain returns'.

Translated, Google is not a premium bidder for properties such as Facebook, Twitter, or any other popular social site...unless it has demonstrated its economic model. Despite the theoretical low capital cost attraction of a community creating or posting content that populates a site, the scaled economic viability of such sites (unless commerce driven) is yet to be effectively replicated.

I suppose the Google Venture capital arm will be a low cost way to experiment within these paradigms.

Good for Google and bad for entrepreneurs and investors in fast growing yet cash consuming and business uncertain companies hoping for a premier exit.