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Google Losing Up To $1.65M a Day On YouTube
An anonymous reader writes "The average visitor to YouTube is costing Google between one and two dollars, according to new research that shows Google losing up to $1.65 million per day on the video site. More than two years after Google acquired YouTube, income from premium offers and other revenue generators don't offset YouTube's expenses of content acquisition, bandwidth, and storage. YouTube is expected to serve 75 billion video streams to 375 million unique visitors in 2009, costing Google up to $2,064,054 a day, or $753 million annualized. Revenue projections for YouTube fall between $90 million and $240 million."
Maybe this is in part because, as Al writes, "Researchers from HP Palo Alto studied videos uploaded to YouTube and found that popularity has little to do with quality or persistence."
While much has been made of Google's amazing ability to make money with online advertisements, the cracks in the dike are beginning to leak.
Youtube is only the first domino in Google's house of cards. As Google increases server-side requirements to support their growing portfolio of online products, they will reach a point where advertising simply won't be profitable anymore. Youtube with its heavy server-side requirements (even running on lighttpd!) just isn't cost effective considering the number of pages they need to serve and the direct links to media they provide.
As someone who likes services that are free, I will mourn the loss of advertiser-paid services, but in terms of the viability of the web this day was inevitable.
Yes, I'm being pompous, condescending and arrogant.
I believe the word you were looking for there is "subjective."
Got a problem with it?
Not really. As long as you don't try to push your ideas on me and demand YouTube focus on your personal priorities and tastes in video, everything is fine and I encourage you to express your opinion.
My work here is dung.
Youtube is failing because all of the stuff worth watching was coincidentally all the stuff they removed for DMCA-related reasons.
And how exactly did they generate revenue before the DMCA takedowns?
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
But is Youtube actually failing? Or is $2m a day money well spent when it comes to keeping the word 'Google' on the tip of everybody's tongue? /thinkingoutloud
Well. I agree that the DMCA BS is terrible. But I don't think that has any bearing on their profit margin. If they are losing money per view... DMCA is probably saving them money by slowly killing youtube. I understand your aggression but clearly it is misdirected.
And is that based on what google pays for the bandwidth, or what anyone else would have to pay for it? Considering google with their size and scope basically get bandwidth for free because it's in everyone's interest to peer with them.
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If any company was losing $1.8M a day you'd see people laid off daily. Corporations would lay off people daily if they broke even on revenue, because broke even means that the salaries and raises put you in the red. Common business sense.
The fact that google still supports youtube means a: it sees it as a profitable business venture and b: they probably buy bandwidth in bulk where usage doesn't affect the cost much. Especially considering this is commercial their monthly bandwidth costs are probably identical every month; only the electrical and man-hours charges change, and I suspect the variance is extremely low. No corporation wants volatile bills from month to month, and guess what? No corporation has completely volatile bills from month to month, or it would fail miserably. /edit: oh god, it's that internet evolution site. Have they ever done anything actually FACTUAL instead of crap? Why didn't someone tag this internetevolution so we could skip this whole article?
Google's strategy is not simply about creating or acquiring ubiquitous online services regardless of profitability. A lot of comments so far have missed the forest for the trees. You want to know why Google beats its competitors in advertising? It's not just brand presence or market domination. It's the way in which they cross-analyze data collected from ALL their services in order to increase the accuracy of their advertising.
I mean, hasn't anyone noticed this yet? Your GMail, Blogger, Calendar, Picasa, and YouTube accounts are all linked. Even the original search that Google started out with provides valuable analytics that are still trade secrets. Users of these services leave a data trail that provides Google with all kinds of information about the user's preferences. That information then gets analyzed and targeted ads are served that increase the likelihood that they'll be clicked. And that's how Google gets the business. Their biggest fear is not whether a product is losing money; it is that nobody is using it and therefore there is no data to mine. All these serivces are just carrots they dangle for the end-user. Their true customers are those who pay for the data they collect from us.
One service does not have to turn a direct profit in order to increase the value of the overall business model.
But... there is also new servers, storage, replacing broken parts, web design/maintenance, and paying the people, and paying for the stuff they use who take car of all of that, the power bill, legal battles, etc...
I'm not sure exactly how. But, it is a completely different set of ballistics, and I'm not sure anyone has it figured out yet. I am grateful for those of the world who are shot from a cannon without much thought to the results, but I do wish them luck. I hope they don't go splat like everyone else who's tried it.
(Also, isn't "web economics are different" a Web 1.0 statement?)
-Graham
It is hard to switch if you are one of the people uploading the videos. At the very least it means you need to re-upload them, along with all the metadata like description and tags, and then re-organise them. Even then, you loose all the comments, links to friends and similar videos, playlists etc.
While the causal viewer may not care much, anyone who uploads or is involved in any way with the community aspects (even if just leaving the odd comment or keeping some favourites lists) is pretty heavily invested.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Time is on Google's side. Look ten years down the road. Hosting costs and bandwidth costs will be greatly reduced, as is the trend. (Think how far web technology has come since 1999.) Advertising models will have matured, and YouTube will have profitable deals with specific content providers.
The most important thing to have is users. People use Google for searches because it is familiar and it is a habit. The same is now true for videos and YouTube. Despite the fact that other video sites exist, most people think of YouTube by default. Google is willing to lose money now in order to encourage this habit, so that when it does become profitable they will be in prime position.