YouTube’s mythbusters: When blogs attack

July 20, 2009

It’s taken a while but YouTube is officially pushing back at the various estimates on how much money it costs parent Google by satisfying our collective hunger for million of video clips every day. Google paid $1.65 billion for YouTube in 2006, when it bought the site from Chad Hurley and former CTO Steve Chen (pictured).

Various YouTube executives we’ve spoken to privately over the last year have bristled at the idea that they are an expensive experiment for Google without a clear profit-making business model. Google CEO Eric Schmidt took the first step in a change of communications strategy in an group interview with reporters at the Sun Valley conference two weeks ago, and to more listeners on the Google earnings call on Thursday. His central point was that everyone’s favorite video site is on the path to profitability.

On Monday, two of YouTube’s PR executives hit back at some of the myths about YouTube’s business with a blog titled “YouTube myth busting.” These include claims that it only features short-form, grainy user-generated content when in fact it has deals with Hollywood partners and features HD content. They also said more than 70 percent of AdAge Top 100 marketers ran campaigns on YouTube in 2008.

But two disputed myths that raised the hackles of the tech blogosphere were related to 1) estimates of YouTube’s cost structure and 2) the “oft-cited” stat that YouTube only monetizes 3-5 percent of the site, which the PR execs said was “old and wrong.” The bloggers wanted some numbers and they didn’t get any from this YouTube’s blog

Here’s Henry Blodget of Business Insider:

Enough already. We’re glad that YouTube has not turned out to be a disaster. (We weren’t among those who thought it would be). But we can’t stand this attitude. If Google is tired of people “picking any number to fit any theory,” then they should just publish the facts.

Peter Kafka of AllThings Digital calls it ‘modest boasting‘:

So really, the big takeaway here is that the Google folks are feeling ever more confident about YouTube’s prospects, enough to do some public chest-beating. But not enough to actually talk about those prospects in concrete terms. YouTube says that estimates that the site can sell ads against only three percent to five percent of its video inventory, first asserted in a well-reported Wall Street Journal piece a year ago, are “old and wrong.” But the company won’t say what percentage of the site it does sell.

Paid Content thinks it’s “myth-spinning” by YouTube and wasn’t convinced either:

The only interesting part comes here: “The truth is that all our infrastructure is built from scratch, which means models that use standard industry pricing are too high when it comes to bandwidth and similar costs. We are at a point where growth is definitely good for our bottom line, not bad.” Which gives credit to this analysis by RampRate last month, which said the costs of video delivery for YouTube are a lot lower than what analysts have previously estimated.

(Photo: Reuters)

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see