YouTube: The Money Pit
by John Paczkowski
Posted on April 3, 2009 at 1:00 PM PT
“Eventually we’d like to make money out of it.”
It’s been well over two years since the $1.65 billion acquisition and Google has yet to truly monetize YouTube. And while the company persists in claiming it has the “luxury of time” to develop the business model through which it will recoup its investment in the popular video site, it’s clear that time is running out. To wit, a report this week from Credit Suisse that predicts YouTube will earn $240 million in revenue in 2009. Which wouldn’t be half bad were it not for the fact that YouTube is on track to lose $470 million in 2009. The research house figures YouTube will rack up about $711 million in operating expenses this year–$360 million on bandwidth alone.
An unfortunate disparity, that. Is it one that can be corrected? Credit Suisse seems to think so. “In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetized (likely through more deals with content companies) and to drive more advertiser demand through standardization of ad formats and improved ad effectiveness,” it explained in a research note. Of course, this is exactly what YouTube is doing. On Monday the company said it has agreed to an ad revenue-sharing partnership with Disney (DIS) that will see it putting ABC and ESPN videos on YouTube. A small first step, but one that could portend a trend. Especially, if as Google (GOOG) CEO Eric Schmidt says, the company hopes to eventually make money out of it.
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Comments
As a media planner for ad agencies in the1980’s, and marketer for media companies in the 1990’s, I watched olde worlde magazines and newspapers startup their lives. Back then, nobody had any illusions that the beasts would turn profitable anytime in the following five years. USA Today took its sweet time – something like 10+ years – before it broke even. Stakeholders in our “Twitter Times” expect investments to be different, I guess, for digital publishing. Admittedly not having paper, ink, and printing presses in the capital expenses column should speed up payback day. Still, can we just give it – our nano-attention span cum expectations – a little bit of a rest?
Posted by David Green at April 7th, 2009 at 12:20 am