Google’s YouTube money hole not as deep as feared

June 18, 2009

How much money is Google losing from YouTube?

Not as much as you think, according to a new report by an IT research and consulting firm.

The cost of streaming billions of videos a month, and Google’s difficulties monetizing those videos, has put YouTube on track to lose almost a half billion dollars this year, according to a famous report by Credit Suisse released in April.

But that report failed to take into account key aspects of the Internet infrastructure business that significantly lower YouTube’s costs, says RampRate, a San Francisco firm that consults companies on IT outsourcing practices.

According to RampRate, YouTube’s vast size means it can negotiate bandwidth deals for about half the cost per megabit per second that Credit Suisse used in its estimates. More importantly, roughly three quarters of YouTube’s bandwidth costs are virtually free thanks to peering arrangements that allow it to bypass carrier networks and the associated fees.

“YouTube’s costs are a fraction of any other company running similar operations,” said RampRate’s report, which also estimated YouTube’s hardware costs to be significantly below Credit Suisse’s assumptions, thanks to Google’s use of off-the-shelf commodity hardware.

All told, RampRate estimates that YouTube’s loss this year is only $174 million versus the $470 million estimated by Credit Suisse.

Google, of course, doesn’t break out financial figures for YouTube, which it acquired for $1.65 billion in 2006. And RampRate said its analysis is based not on any inside information about Google, but rather from the knowledge of the online infrastructure business it has acquired by working with clients.

Of course, RampRate’s estimate of a $174 million loss means YouTube is still losing a hefty chunk of change.

But RampRate argues that YouTube provides value by serving as a sort of loss leader for Google. While Google loses money on YouTube, the extra scale it gets with the video service gives the company the clout to negotiate better infrastructure deals for Google’s broader needs.

“Far from being an infrastructure money pit, YouTube is key to reducing operational costs for other Google initiatives,” said the RampRate report.

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4 comments

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I still believe that Google bought YouTube for pennies, it strikes me that a company that more or less made the internet is unable to make money with YouTube. Mind you this is a website with huge traffic and an Alexa rank of 3 (the number three site on the net when it comes to visitor numbers). If they can’t make it work who can?

Google losing money on YouTube? Stop kidding us. All those “featured videos” and paid ads that are clogging the youtube now… google is Making money on youtube. [don’t do no evil…if you are not losing money[

Posted by Steve | Report as abusive

The You Tube Business Model or [powered by gurfrip.com/utube-'you be the star' online video file sharing system] was designed to be monetized two (2) ways but was absconded by Google/Sequoia Capital when the second was applied for to be an ad partner in 2004.

You Tube is worth over 10 Billion US Dollars and the reason Google wants to devalue the most significant media asset created in the last 30 years is to delay payment of the Financial Settlement for the largest intellectual property theft in US History.

In this regard, Dr. Eric Schmidt and the Google Board of Directors have planned to disrupt the US Federal Government Judicial Process via compromising relationships that were created by their overt(c) support of Presidential Candidate Barack Hussein Obama.

After publishing the encrypted threatening message CADIE as an April (fools) Joke, Google induced the now president to officially retain Dr. Eric Schmidt as a cabinet level advisor.

The purpose of this advisory is to limit systemic distrust of Google Corporation which will effect the shareholders in this Consumer Product. Obama has become disabled in administering the matter to the benefit of the Public Trust because of his knowing acceptace of campaign support from a US Company that engaged in Intellectual Property Piracy and Economic Espionage.

Though Piracy is viewed as a Crime when done by an individual stealing MP3′s, The DOJ under Obama is seeking to make CIVIL MATTER of the You Tube Crime which includes a $1,800,000,000.00 defrauding of Google investors by Dr. Eric Schmidt, though this defrauding of the public markets in this matter does not matter because ultimately Google Shareholders made over 7,200,000,000.00 in value from the You Tube transaction.

However because of Low Cash Flow from the missing element of the total model and the federal complaint, Google has used its ample media coverage to discredit the value of You Tube and Lobby directly President Obama to continue to delay payment of a financial Settlement proposed by Google through a Governmental Intermediary over Two (2) Years ago.

Because of a matter of use of Warrantless Surveillance on the VICTIM during the period prior to, during and after the Piracy Theft, the matter has been relegated to FISA.

There is no FISA COURT.

FISA is way for the US Federal Government to Ignore Crime’s like the You Tube matter in order to keep a filing of Lawsuit out of Public View. In this matter Google has sought to lobby elements of the FISA system through its presidential relationship to delay payment.

The French Government, now appraised of the matter of surveillance of the domestic US Family of a French Government Official, may now officially subpoena the US government for the Surveillance Records.

In any case, the You Tube matter has become an international embarassment to the United States Government as an overt allowance of Whitecollar Crime where shareholders are beneficiary and surpression of individual VICTIMS because of the individual nature. Allowing National Security Mechanisms to Cover Over such Crime, because it has shown financial benefit, while the individual VICTIM is ignored.

This was the self-same process via which madoff went on to steal 65,000,000,000.00 from over 4,000 individuals.

No one will complain when their making money.

And You Tube has made Google a lot of Money.

Despite the fact it is stolen property.

Unprosecuted Theft is 100% profitable.

It is the same principal as the Mafia. It is not the Crime that is the risk, it is getting caught and if getting caught doesn’t matter because you can delay the government through inappropriate executive level relationships, then the fact that a crime was aggregious against an individual citizen is irrelevant so long as its beneficiaries Google/Sequoia Capital shareholders have made extraordinary profits from the crime.

Well, if its really loss-making unit we should expect some strong steps being taken by Google in this direction and if its not then Youtube would continue running as now. That’s how one can ascertain the truth.

[...] Google’s YouTube money hole not as deep as feared – Reuters BlogsNot as much as you think, according to a new report by an IT research and consulting firm. The cost of streaming billions of videos a month , and Google’s difficulties monetizing those videos, has put YouTube on track to lose almost a half billion [...]

[...] Google’s YouTube money hole not as deep as feared – Reuters BlogsNot as much as you think, according to a new report by an IT research and consulting firm. The cost of streaming billions of videos a month , and Google’s difficulties monetizing those videos, has put YouTube on track to lose almost a half billion [...]