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.
