The Next Youtube

According to Thedeal: "Investors in video-sharing Web sites were no doubt seeing dollar signs in their sleep last October after Google Inc. acquired YouTube Inc. for $1.65 billion. The acquisition helped validate the prospects of Web 2.0 companies, and it appeared to be only a matter of time before the secondary players were gobbled up.

They're still waiting.

Despite speculation that the YouTube deal could lead to a run on video-sharing sites, M&A activity in the sector has been sparse.

According to Nielsen/NetRatings, YouTube had 38 million unique visitors in December 2006, far surpassing second-tier players such as Break.com, with 3.3 million unique visitors and Metacafe, with 2.9 million visitors. (see chart)

Despite their fairly small user numbers, second-tier video sites may have overvalued themselves post Google-YouTube. Yahoo! Inc. was reported to be interested in Metacafe for $200 million to $300 million before backing off. There was some speculation that Yahoo! was spooked by a decline in Metacafe's U.S. audience numbers, and perhaps the price tag."