Orange Buys 49 Percent of Dailymotion for $80 Million

Orange, or rather France Telecom as the company is actually named, is buying a 49 percent stake in Dailymotion the second largest video site on the web. It's paying €59 million, about $80 million, for it, valuating the company at about €120 million, a steal at first glance.

Of course, with revenues of just €18 million in 2010, there's not much more it could have fetched.

And, apparently, there is more to the story, the deal isn't as bad for Dailymotion and its investors as it would seem.

"Dailymotion is one of the rare successes of the French internet and we are rethinking our content strategy so this deal fits together well. Dailymotion is the only real alternative to YouTube in the world," France Telecom Chief Executive Stephane Richard said in a press conference.

"We want to find a business model that will make Dailymotion profitable, not just allow it to attract visitors," he explained.

Orange has been making a series of acquisitions and investments in content distribution and has a clear strategy down this path. It has already partnered with Deezer, a French music streaming service.

The company has confirmed its 49 percent stake acquisition and is working on a deal for the remaining shares. Orange is said to be looking to buy the video site altogether by 2013.

The French telco will pay for the remaining stake at a valuation between $120 million and $280 million depending on revenue. Dailymotion has doubled its revenue in 2010 and is expected to bring in $50 million by 2013.

Google paid $1.65 billion for YouTube in 2006 and the site is still not profitable. YouTube is estimated to be bringing in close to $1 billion at this point.

Dailymotion is profitable though and expects to remain so even as it grows. The site is particularly popular in its native France, but also in a number of foreign markets.