Google Losing Up To $1.65M a Day On YouTube 290
An anonymous reader writes "The average visitor to YouTube is costing Google between one and two dollars, according to new research that shows Google losing up to $1.65 million per day on the video site. More than two years after Google acquired YouTube, income from premium offers and other revenue generators don't offset YouTube's expenses of content acquisition, bandwidth, and storage. YouTube is expected to serve 75 billion video streams to 375 million unique visitors in 2009, costing Google up to $2,064,054 a day, or $753 million annualized. Revenue projections for YouTube fall between $90 million and $240 million."
Maybe this is in part because, as Al writes, "Researchers from HP Palo Alto studied videos uploaded to YouTube and found that popularity has little to do with quality or persistence."
Youtube and the death of the advertising model (Score:5, Insightful)
While much has been made of Google's amazing ability to make money with online advertisements, the cracks in the dike are beginning to leak.
Youtube is only the first domino in Google's house of cards. As Google increases server-side requirements to support their growing portfolio of online products, they will reach a point where advertising simply won't be profitable anymore. Youtube with its heavy server-side requirements (even running on lighttpd!) just isn't cost effective considering the number of pages they need to serve and the direct links to media they provide.
As someone who likes services that are free, I will mourn the loss of advertiser-paid services, but in terms of the viability of the web this day was inevitable.
Re:Garbage In, Garbage Out (Score:1, Insightful)
web 2.0 economics is different (Score:3, Insightful)
I'm not sure exactly how. But, it is a completely different business model, and I'm not sure anyone has it figured out yet. I am grateful for the Googles of the world whoe enter these ventures without much thought to the compenssations, but I do wish them luck. I want youtube to stay around.
Re:REALLY now? (Score:5, Insightful)
Yes, I'm being pompous, condescending and arrogant.
I believe the word you were looking for there is "subjective."
Got a problem with it?
Not really. As long as you don't try to push your ideas on me and demand YouTube focus on your personal priorities and tastes in video, everything is fine and I encourage you to express your opinion.
Money drains (Score:3, Insightful)
Google has a fundamental problem: except for search ads, nothing they do makes money. Google has already dumped a few money-losing services, and they may well dump more of them. Even the few non-ad products that bring in revenue, like the Google Search Appliance and the corporate version of GMail, aren't very successful. Google stock is down 50% from the peak in 2007, and most of that decline came before the recession. Investors are getting annoyed at the money draining products.
I wouldn't be surprised if Google dumps YouTube and starts charging for GMail.
Quality vs. Quantity. (Score:3, Insightful)
C'mon, are the quality and popularity statistics really that surprising when the average YouTube video is uploaded with a cheap webcam and recorded by someone who makes Paris Hilton look like Einstein?
I believe a famous dog once said "I leave more personality in tightly coiled piles on the lawn."
Re:REALLY now? (Score:5, Insightful)
Youtube is failing because all of the stuff worth watching was coincidentally all the stuff they removed for DMCA-related reasons.
And how exactly did they generate revenue before the DMCA takedowns?
Re:Money drains (Score:3, Insightful)
That's a stupid way of looking at it. They are my central hub. Everything they do is gear toward information gather and making more money. Google maps? They know the spots I drive to with a simple search, I get directions in return. What benefit is that to them? More targeted ads, and selling info if they so choose.
May as well kill their search as well and call it a day.
That would kill Gmail. Gmail is also the only place where I have noticed their one line ads.
They dump services that aren't popular. That makes sense from both sides. Youtube is very popular, they would be extremely stupid to close shop on the #1 place people turn to videos on the internet. I would say the only problem with youtube is that it's poorly organized. "Channels" are basically clips in the order people submitted them, so you can't tie 10 minutes segments any other way (or any logical way - they need to fix that).
They also should work on ads, no longer than 10-15 seconds, to insert in front of videos randomly and allow revenue sharing. But to close shop would be like CBS/NBC/ABC all simultaneously killing their radio stations in the 1920s because it wasn't making money over fist right from the beginning.
Re:Garbage In, Garbage Out (Score:3, Insightful)
Re:Youtube and the death of the advertising model (Score:5, Insightful)
I would point out that Microsoft has lasted for decades with huge money draining projects, on a few heavily profitable ones.
Re:REALLY now? (Score:5, Insightful)
Re:REALLY now? (Score:5, Insightful)
Re:REALLY now? (Score:5, Insightful)
And is that based on what google pays for the bandwidth, or what anyone else would have to pay for it? Considering google with their size and scope basically get bandwidth for free because it's in everyone's interest to peer with them.
Re:Garbage In, Garbage Out (Score:5, Insightful)
If any company was losing $1.8M a day you'd see people laid off daily. Corporations would lay off people daily if they broke even on revenue, because broke even means that the salaries and raises put you in the red. Common business sense.
The fact that google still supports youtube means a: it sees it as a profitable business venture and b: they probably buy bandwidth in bulk where usage doesn't affect the cost much. Especially considering this is commercial their monthly bandwidth costs are probably identical every month; only the electrical and man-hours charges change, and I suspect the variance is extremely low. No corporation wants volatile bills from month to month, and guess what? No corporation has completely volatile bills from month to month, or it would fail miserably. /edit: oh god, it's that internet evolution site. Have they ever done anything actually FACTUAL instead of crap? Why didn't someone tag this internetevolution so we could skip this whole article?
It's not about the content (Score:5, Insightful)
Google's strategy is not simply about creating or acquiring ubiquitous online services regardless of profitability. A lot of comments so far have missed the forest for the trees. You want to know why Google beats its competitors in advertising? It's not just brand presence or market domination. It's the way in which they cross-analyze data collected from ALL their services in order to increase the accuracy of their advertising.
I mean, hasn't anyone noticed this yet? Your GMail, Blogger, Calendar, Picasa, and YouTube accounts are all linked. Even the original search that Google started out with provides valuable analytics that are still trade secrets. Users of these services leave a data trail that provides Google with all kinds of information about the user's preferences. That information then gets analyzed and targeted ads are served that increase the likelihood that they'll be clicked. And that's how Google gets the business. Their biggest fear is not whether a product is losing money; it is that nobody is using it and therefore there is no data to mine. All these serivces are just carrots they dangle for the end-user. Their true customers are those who pay for the data they collect from us.
One service does not have to turn a direct profit in order to increase the value of the overall business model.
Re:Garbage In, Garbage Out (Score:4, Insightful)
Youtube is a loss-leader and has become akin to "Kleenex" or "coke". Obviously the goog execs see it as a good move to keep something that loses money. Perhaps they have plans to monetize it somehow. Who knows. All the what-ifs aren't going to change they fact that Youtube takes more to operate then it brings in. Google is likely subsidizing that loss from adwords revenues.
Re:REALLY now? (Score:5, Insightful)
But... there is also new servers, storage, replacing broken parts, web design/maintenance, and paying the people, and paying for the stuff they use who take car of all of that, the power bill, legal battles, etc...
Cannon 2.0 trajectories are different. (Score:5, Insightful)
I'm not sure exactly how. But, it is a completely different set of ballistics, and I'm not sure anyone has it figured out yet. I am grateful for those of the world who are shot from a cannon without much thought to the results, but I do wish them luck. I hope they don't go splat like everyone else who's tried it.
(Also, isn't "web economics are different" a Web 1.0 statement?)
-Graham
Re:REALLY now? (Score:3, Insightful)
Also, one of the reasons I've stopped using YouTube other than the occasional linked-from-some-other-website-or-email visit is the fact that they fucked up the favorites functionality. You used to be able to simply page through your list of favs, adding them to your quick list by simply clicking on the '+' widget on the video snapshot, but now you have to make a selection and then scroll back up and click on a button that then shows a dropdown menu. Then on to the next page. This loss of usability is completely idiotic, and it was even buggy at first because you would randomly lose selections when you switched to a new page.
Also, not that you could do this before, but you can't search your own favorites. Let me repeat that: Google, the search company, does not let me do a scoped search on a list of videos. They've "upgraded" that site so much over the past two years, adding and removing functionality in apparently random ways (see above), but they haven't been able to find the time to allow a favorite search. Am I the only person in the planet who's accumulated 500+ favorite videos in the past 4 years? Surely not.
When it first started, YouTube used to be the Napster of video - a place that you could explore and find amazing stuff and things you hadn't seen in freaking ages. It was wonderful. Thanks to the *AA and Google's expert ham-handedness though, all that is going away.
Re:REALLY now? (Score:5, Insightful)
It is hard to switch if you are one of the people uploading the videos. At the very least it means you need to re-upload them, along with all the metadata like description and tags, and then re-organise them. Even then, you loose all the comments, links to friends and similar videos, playlists etc.
While the causal viewer may not care much, anyone who uploads or is involved in any way with the community aspects (even if just leaving the odd comment or keeping some favourites lists) is pretty heavily invested.
Advertiser-paid services aren't going away. (Score:5, Insightful)
Time is on Google's side. Look ten years down the road. Hosting costs and bandwidth costs will be greatly reduced, as is the trend. (Think how far web technology has come since 1999.) Advertising models will have matured, and YouTube will have profitable deals with specific content providers.
The most important thing to have is users. People use Google for searches because it is familiar and it is a habit. The same is now true for videos and YouTube. Despite the fact that other video sites exist, most people think of YouTube by default. Google is willing to lose money now in order to encourage this habit, so that when it does become profitable they will be in prime position.