MediaFile

Sun Valley: When will YouTube make a profit?

July 10, 2009

That question has got louder and louder from investors and Wall Street analysts concerned that YouTube owner Google is racking huge profit-hindering costs to be the free online video platform for the world. It seems Google’s top guys don’t know the answer either — or if they do, they’re choosing not to share it with reporters on Thursday.

Google CEO Eric Schmidt told a media briefing at Sun Valley that he believes YouTube, which his company spent $1.65 billion to acquire three years ago, will come good thanks to its recent launch of new advertising formats such as pay-to-promote and pre-roll ads. “We’re optimisic that YouTube will be a strong revenue business for us because of these products,” he told reporters.

But the problem is investors are more concerned with the huge costs involved in streaming millions of videos globally everyday with a very small percentage of them covered by advertising. In other words when will YouTube make money from its dominance?

“We don’t make predictions,” said Schmidt. But then co-founder Larry Page piped in “It’s not that important.” Really? “I’m not worried it will be profitable, we want it to be very profitable,” Page said.

For Schmidt, an important part of YouTube’s future will involve more premium content from small three-man production teams to Hollywood studios. He acknowledged he’d like for YouTube to have some of the content of Hulu.com, which now features Disney-owned shows as well as NBC and News Corp programming. All three companies own Hulu. “We think we need premium content,” he said.

(Photo: Reuters/Rick Wilking)

Comments
7 comments so far | RSS Comments RSS

Google acquired YouTube for pennies and they know, many companies would kill to have a website with the massive traffic YouTube has. Maybe Google should consider putting some Facebook execs on their payroll as Facebook has no problems making a profit.

 

You tube shouldn’t be a “profitable” thing. Right now Google enjoys the good will of the people. It supports the open source community which is growing steadily. And what Google provides to the community at large in terms of “YouTube”, is the equal to the twentieth century’s creation of C-Span by the cable companies.

But YouTube provides so much more in the way of interactivity that it has moved beyond anything that could be considered as fitting within something as simple as a “business” model. It has become synonymous with the Internet and as such represents a far greater value to Google than a simple business model.

 

Benny, you are an idiot.

YouTube employs webmasters, technicians, and programmers, not to mention administrative staff. They have to pay for drive space, hardware, and massive ammounts of bandwidth. Goodwill will not coveer a tithe of the costs of running Youtube; you can’t run a high-tech site with a hair-shirt budget.
At some point, the site has no choice but to find a way to make a profit or it will be bye-bye YouTube.
Welcome to reality.

 

Thansk all.

 

It looks like YouTube may already be making a profit, actually. In this GigaOM post, they site a report that points to some faulty overhead numbers that, when corrected, could put YouTube in the black. Its worth checking out, if only for a different take on the financial structure and dealings of the company: http://gigaom.com/2009/06/16/youtube-inf rastructure-costs-vastly-overestimated-r eport/

Posted by Willy | Report as abusive
 

@Nikkei

Facebook hasn’t made a profit yet.

Posted by John | Report as abusive
 

I don’t think google doesn’t make profit. It actually does. But it’s a clever move by google to say they don’t make any money at the moment. So it’s a plan, and they will show it step by step.

Posted by bookmaker | Report as abusive
 

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