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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.
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.
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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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.
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.
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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.