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2010 May Be the First Year YouTube Turns a Profit 89

Posted by Soulskill
from the keep-throwing-ads-in-there-we-love-it dept.
eldavojohn writes "Analysts are saying that this year will be the first year YouTube turns a profit. From the New York Times article: 'In the last year, the video site has become a significant contributor to the family business at a time when Google, which makes more than 90 percent of its revenue from text search ads, is seeking a second act. Though Google does not report YouTube's earnings, it has hinted that it is hovering near profitability. Analysts say YouTube will bring in around $450 million in revenue this year and earn a profit. Revenue at YouTube has more than doubled each year for the last three years, according to the company.' Of course a little over a year ago we were being told that YouTube was losing around $1.65 million each day. Regardless, when you pay $1.65 billion for a business, you probably don't expect it to take three to four years before you start making your money back."
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2010 May Be the First Year YouTube Turns a Profit

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  • by Anonymous Coward on Friday September 03, 2010 @04:31PM (#33470156)

    Regardless, when you pay $1.65 billion for a business, you probably don't expect it to take three to four years before you start making your money back.

    This is why google is eating everybody's lunch. Thinking this far is a good thing when you are able to double revenues year over year. Not a bad long run strategy.

    • Re: (Score:2, Funny)

      by MrEricSir (398214)

      This is why google is eating everybody's lunch.

      Mommy, Google stole my lunch money!

      • by rtb61 (674572)

        Lets be honest a far better strategy would have to get google video to beat youtube not to buy it. Consider this, Google management didn't think they would be able to beat youtube even if they invested $1.65 billion into google video. Personally I think the purchase had more to do with google's management not wanting to appear as losers versus youtube management, for google to buy youtube was to admit defeat.

        Video is now sourced from many sites. Google's lack of income out of youtube points to it's anti-

        • Google all powerful? Lost in social media, lost in video, no big winner in email, so only really wins in search.

          Not lost in video... just because they -- as you say -- admitted defeat by purchasing YouTube doesn't mean they lost. They now own YouTube, the largest video sharing site on the planet and only growing farther, so they win there. Yes a big winner in email... all the time I see people I know switching to Gmail from Yahoo, Hotmail, whatever, and I know that I wouldn't use any other email service. Yeah, kinda lost in social media to a degree -- at least in the US. Orkut is huge in South America, and YouTube an

        • by AHuxley (892839)
          I feel the real deal is in ip tracking, ads and real time feedback to customers and about the interests of consumers.
          Google does not care whats on youtube, they care about what your searching for.
          MS seems to be dreaming of a percentage of life itself, from medical, entertainment, finance, just in time solutions, robotics, DRM ect.
    • by drsquare (530038)

      It's a sad comment on modern capitalism that four years is considered long-term thinking.

  • by LostCluster (625375) * on Friday September 03, 2010 @04:32PM (#33470162)

    In the .com error days, people valued money-losing Internet companies as if they would gain market share and be able to raise prices in the future. Most failed at doing that, and the bubble burst.

    But Google has this insanely profitable AdWords business, and therefore can fund a money-loser and work the ads in slowly... which is exactly what they did with YouTube. Look out phone companies, you're next.

    • by FuckingNickName (1362625) on Friday September 03, 2010 @04:43PM (#33470266) Journal

      But Google has this insanely profitable AdWords business

      If only the Mozilla Foundation had the balls to include an ad blocker which dealt with Google Adwords, perhaps we'd start to see an Internet funded by people willing to pay for (or share) quality content rather than an Internet funded by advertisers pushing crap to the lazy and easily persuaded.

      • by easterberry (1826250) on Friday September 03, 2010 @04:49PM (#33470308)

        ...perhaps we'd start to see an Internet funded by people willing to pay for (or share) quality content...

        Ask the games and music industry how that's working out for them...

        • by pspahn (1175617)

          I think quality was the operative word there.

        • by Fumus (1258966)

          Lately, games you PAY for include "unobtrusive" ads anyway.

        • by Patch86 (1465427)

          Seeing as the games industry is still experiencing year-on-year growth almost every single month, I'd say that it's working out pretty well for them...

      • by tftp (111690)

        If only the Mozilla Foundation had the balls to include an ad blocker which dealt with Google Adwords

        Something like http://www.optimizegoogle.com/ [optimizegoogle.com] ?

      • Mozilla's on the take... they get paid for featuring Google as the default search engine in Firefox. Besides, Google would be able to get around any attempt to block their ads totally... they've got ways to make them indistinguishable from content.
        • by Threni (635302)

          Plus Firefox is on the way out. Let's hope for their sake it doesn't take them another 4 years to finish their mobile version...and that they manage to speed it up and slim it down below 20 megs.

        • by epine (68316)

          Besides, Google would be able to get around any attempt to block their ads totally... they've got ways to make them indistinguishable from content.

          The day Google ad content becomes indistinguishable from the neo-Trotskyite content I enjoy perusing on aldaily.com (until my eyes glaze over) is the day I pull my plug on the grid and run for the hills.

          Ad content has that new car smell, and I think it always will. I don't think a new-car-smell detector is much harder than breaking a CAPTCHA. Unfortunately, ant

          • "The day Google ad content becomes indistinguishable from the neo-Trotskyite content I enjoy perusing on aldaily.com (until my eyes glaze over) is the day I pull my plug on the grid and run for the hills."

            Challenge Accepted!

            ---

            As often, RandallMonroe of XKCD has provided a jumpgate.

            http://www.xkcd.com/788/ [xkcd.com] (All rights reserved to Randall Monroe, used for educational purposes only.)
            The Carriage
            "Because I could not stop for death, he kindly stopped for me. The carriage held but just ourselves ... ((Action se

      • Re: (Score:3, Insightful)

        by e4g4 (533831)

        If only the Mozilla Foundation had the balls to include an ad blocker which dealt with Google Adwords

        I like Google AdWords. Well, perhaps it's better to say that I don't dislike them. They are unobtrusive, easy on my battery/processor temp, and occasionally useful. I see no reason to block them.

        • by vux984 (928602) on Friday September 03, 2010 @07:20PM (#33471470)

          I like Google AdWords. Well, perhaps it's better to say that I don't dislike them. They are unobtrusive, easy on my battery/processor temp, and occasionally useful. I see no reason to block them.

          The ads themselves don't bother me. The fact that virtually every website I visit reports to google that I went there does. Sometimes it feels like I might as well be browsing through a google proxy, and just feeding them every url I visit as I go there. This is what they want. And adwords is ubiquitous enough that it almost gives it to them. Add in gmail, youtube, and the other g-services, and google analytics on the backend on a lot of sites that don't have ads and... they are closer than you think.

          I find that offensive. I don't want to be stalked and everything I do recorded by google. And googles reply is essentially... "we're not singling you out" doesn't imrprove my view of it. Just because they are using the technology to stalk everyone at once doesn't change anything... if anything it just makes it worse.

          • Re: (Score:3, Insightful)

            by Ash Vince (602485) *

            The ads themselves don't bother me. The fact that virtually every website I visit reports to google that I went there does. Sometimes it feels like I might as well be browsing through a google proxy, and just feeding them every url I visit as I go there. This is what they want. And adwords is ubiquitous enough that it almost gives it to them. Add in gmail, youtube, and the other g-services, and google analytics on the backend on a lot of sites that don't have ads and... they are closer than you think.

            I find that offensive. I don't want to be stalked and everything I do recorded by google. And googles reply is essentially... "we're not singling you out" doesn't imrprove my view of it. Just because they are using the technology to stalk everyone at once doesn't change anything... if anything it just makes it worse.

            You are singling google out though. Every advertising company does this sort of crap. And the battle against any advertising was lost years ago, mainly becuase too many people actually buy stuff as a result of adverts.

            The only thing I try and remember is that the adverts I am bombarded with are used to finance me getting a free service. If Google moved away from an advert supported model they would have to charge a subscription to voder their costs. Since I use Google a lot this would cost me a fortune.

            • by vux984 (928602)

              Every advertising company does this sort of crap.

              Google is different.

              Google controls 70% of the online ad market. That, by itself puts it in its own category. Everyone else from Microsoft and Yahoo on down fights over 30%. Google also has 66% of the search market.

              The difference between living under surveillance and not is one of degree. Getting caught on some guys camera on the way to work is not surveillance. Having that guy setup 100,000 camera's in the city and watch me as I move around is.

              The other adve

      • by unixan (800014)

        If only the Mozilla Foundation had the balls to include an ad blocker which dealt with Google Adwords

        Do I detect a non-user of AdBlock Plus [mozilla.org]? It's been featured on the Privacy & Security [mozilla.org] page of addons.mozilla.org for ages now, and occasionally featured on the front-page as well.

        Yes, it works just fine with Google text-based ads, too. I haven't seen them in months.

      • by Caetel (1057316)
        Considering Mozilla rely on Google for revenue, pissing them off probably wouldn't be in their own best interest.
    • Google's aims in buying youtube were not just long term, but also wide/strategic.

      Owning youtube puts them in a position where they get to decide what the next well supported steaming video codec will be. If they didn't have youtube, they would be in a position where Apple or Microsoft could lock them out of video ads - particularly on the mobile front.

    • by owlnation (858981)

      But Google has this insanely profitable AdWords business, and therefore can fund a money-loser and work the ads in slowly... which is exactly what they did with YouTube. Look out phone companies, you're next.

      That's true, sort of. If they had stuck with adwords that would have been completely fine. That's not, however, what they did. Over the course of a year Youtube has gone from being usable, to completely unusable for me. Flashing ads, ads that pop up over the video content, animated gifs and all sorts

      • by h4rm0ny (722443)

        I wouldn't say that YouTube has become "unusable" for me, but it's certainly become really fucking irritating. I spend half the time I'm watching something on YouTube irritatedly clicking to get rid of some add that's just popped over the bottom 20% of the video.
        • by EdIII (1114411)

          That's your experience as a user. It's far worse when you are company and/or developer forced to use YouTube as a business model.

          It's like a twisted horror movie with the psycho asking you to choose between the life of your daughter and your wife. A bit melodramatic, but YouTube is really driving a lot of us crazy.

          Of course, some will say that you have a choice. Not really. Those developers who create sites that only work in Firefox, or even Safari, and then arrogantly state that IE's malfunctions ar

    • Look out phone companies, you're next.

      "Please wait a few moments while we connect your call. In the meantime, here is a message from our sponsors." ;)

  • by FooAtWFU (699187) on Friday September 03, 2010 @04:33PM (#33470168) Homepage
    It's not like Google didn't know what they were getting themselves into. I'm sure they're doing just fine over there.
    • Yeah, I'm pretty sure when you buy a business that's losing money hand over fist you expect it to continue doing so for a while anyway. I didn't see anyone at the time postulate that they were picking it up for the revenue.

  • Music (Score:5, Interesting)

    by MichaelSmith (789609) on Friday September 03, 2010 @04:34PM (#33470180) Homepage Journal

    I run linux so I can't use itunes, which partly blocks me from buying music on line. Lately if I want to listen to a track I search for it on youtube and watch a video. Once a week I seem to spend an hour or so clicking through links from one video to another. Youtube has a fantastic collection of early Kate Bush demo recordings.

    I bet they charge a lot of money for targeted adds on videos. Google knows my wife wants to buy a new car...

    • Re:Music (Score:5, Insightful)

      by h4rr4r (612664) on Friday September 03, 2010 @04:39PM (#33470234)

      Amazon sells pretty much everything too, and 7digital, the company behind the ubuntu music store, is another great choice.

    • Re:Music (Score:4, Informative)

      by crow (16139) on Friday September 03, 2010 @04:40PM (#33470242) Homepage Journal

      And if you save them, and dump the sound track with mplayer, you usually end up with a nice 128kbps MP3.

      • Re: (Score:2, Insightful)

        by SiMac (409541)

        And if you save them, and dump the sound track with mplayer, you usually end up with a nice 128kbps MP3.

        Well, you end up with a 128 kbps MP3, but it's not usually too nice because YouTube compresses the hell out of audio. Depending on the source material, parameters used, and your ears, you may or may not care, but it's hard not to notice. I am pretty sure that YouTube does this for a reason.

        • Re: (Score:2, Interesting)

          by Kerrigann (1401847)

          If there's an mp4 HD version of the video, and you dump (not re-encode) the AAC audio it can actually sound pretty good.

          I'm assuming mp4 on youtube is always h.264/AAC, which it seems to be. Sometimes an flv video will also have AAC audio, but it's usually, like you said, compressed as hell.

    • by pspahn (1175617)

      Try eMusic.com [emusic.com]. DRM free, Linux client, tons of music, and no major label garbage.

      • Re: (Score:3, Informative)

        by vadim_t (324782)

        And they sell their data to spammers, unfortunately.

        I registered some time back with an emusic@domain.com email address (I make a new alias for every website), and regularly get spam mailed to it. And I don't mean emusic advertisements, or even some sort of partner thing. It's viagra and xanax spam.

        I only went as far as getting a trial account, and due to this will never go any further.

        • I've been their customer since they opened their doors and I never got any spam. Are you sure it wasn't a lucky guess of a valid email address by the spammers?

          • by pspahn (1175617)

            I stopped my subscription a year or so ago because I wasn't using it enough, but I too wasn't getting spam related. But, then again, my inbox is pretty well trained by now so I almost never see spam anyway.

            • I've never noticed any spam from them, but I stopped simply because I wasn't using the subscription enough. What eMusic needs is for the credits to roll over month-to-month

              They *do* have *some* stuff controlled by major labels, but their availability seems a bit hit-and-miss on both that and indie stuff I was looking for

      • by mattack2 (1165421)

        and no major label garbage

        Translation: No music that the vast majority of people want to listen to.

        • by pspahn (1175617)

          /. != Vast majority of people

          I've found a lot of good music from eMusic that I would have otherwise not known about. And they are bands that play shows at any of the many music venues near where I live. They are also the kinds of bands that have no qualms about putting their live shows online, for free [archive.org].

  • by e065c8515d206cb0e190 (1785896) on Friday September 03, 2010 @04:34PM (#33470182)
    I assume that profit is "revenue - operational cost", i.e. "advertising - server farm".

    That's very different from "getting your money back".
    • I assume that profit is "revenue - operational cost", i.e. "advertising - server farm".

      That's very different from "getting your money back".

      On the other hand there is "not losing ad revenue to video streaming sites".

  • Old School Dot Com (Score:5, Interesting)

    by hhawk (26580) on Friday September 03, 2010 @04:38PM (#33470222) Homepage Journal

    While It might be old school dot com to start a business and "try to lose as much $$ as possible" it's clear that Google through YouTube has created something very valued, given the reach and impact YouTube has. What remains to be seen is through Google TV and other technologies can they bring this video from the desktop to the set top?

    Also interesting will be to see if they can get as much corporate content as they already have consumer content. They did do away with Google Video service..

    I would love it if YouTube/Google/Google TV was my one shop stop for searching on video content and then let the technology figure out how best to view it; also figure out the cheapest way. For example I subscribe to HBO on demand but on my cable box when I search for movies they will charge me for watching these movies unless I come in via the HBO interface.. I need a video search service that is looking to minimize my expenses not increase them.

    • Re: (Score:2, Funny)

      by KimmoS (1448215)

      Google through YouTube has created something very valued

      You must be new to Dot Com 2.0?

      According to Mayan astrology, the data-mining bubble will burst in 2012, resulting in expanded contentiousness regarding privacy issues. That will result in a collapse of the Web 2.0 and Social Media. The majority of all people has at this point lost all their IRL social skills and their ability to interpret exformation in regular IRL social situations == Zombie Apocalypse

  • Strangly this coincide with the year of linux on the desktop. So it must be due to all the new linux desktop accessing youtube.
  • Bravo youtube *claps* I would have though you would have been sued into oblivion by copyright lawyers shortly after you spawned (i.e. viacomm suit). Thanks for making work a lot less dull these last few years!
  • Youtube is just a couple more Bed Intruders away from profitability.
  • Odd summary (Score:5, Interesting)

    by proxima (165692) on Friday September 03, 2010 @04:56PM (#33470352)

    The main point of the article is how Youtube is enabling a shift in how copyright holders deal with unauthorized content. They scan new videos for content matching that provided by content owners and split ad revenue with them. It's certainly less confrontational than DMCA takedown notices, but I imagine it's full of gray areas: what if the video I upload uses 15 seconds of a music video for commentary but is otherwise 9 minutes of my own contribution? Does Youtube still show more-than-usual ads and split the revenue with the artist?

    Is there any way we can reliably well which videos have this revenue sharing? Some things are obvious - official music videos often have more ads and big "VEVO" logos everywhere. But how about these user-uploaded videos?

    • When you upload the video, if it finds a content match it tells you and explains what that means for you. I did a music video for "Crazy" by Gnarls Barkley and it identified the audio track, told me that it identified the audio track, and placed a link to buy the song under the video. I assume had it been from an artist/label/etc who doesn't want any unauthorized use of their content, it would have blocked the audio (or entire video) and notified me in the same way that it had done so.
      • by proxima (165692)

        When you upload the video, if it finds a content match it tells you and explains what that means for you. I did a music video for "Crazy" by Gnarls Barkley and it identified the audio track, told me that it identified the audio track, and placed a link to buy the song under the video. I assume had it been from an artist/label/etc who doesn't want any unauthorized use of their content, it would have blocked the audio (or entire video) and notified me in the same way that it had done so.

        Okay, so the uploading

    • by pspahn (1175617)

      I watch me some YouTube, but I was very unaware of this feature until recently.

      I was drinking with some friends one night while my girlfriend was traveling in Norway. I happened to be karaoke night and her birthday was in a couple of days. Since I couldn't give her anything in person, I had the idea that I would sing one of her favorite songs (Talking Heads, This Must Be the Place) and YouTube it to her on her birthday.

      I was astonished after uploading it that it told me I had uploaded content that contain

    • by eldavojohn (898314) * <eldavojohn AT gmail DOT com> on Friday September 03, 2010 @05:38PM (#33470746) Journal

      The main point of the article is how Youtube is enabling a shift in how copyright holders deal with unauthorized content.

      Disclaimer: Summary author here. Honestly, wasn't too interested in that. YouTube's been auto-recognizing songs and videos through fingerprinting [slashdot.org] for quite sometime now and making an ad [slashdot.org] for the song pop up at the bottom of the video because you don't own it. I saw this with my friend's account as early as 2008.

      Neat trick but not really fresh news to me. And you know, I read the article and the only thing that caught my eye was that YouTube might be turning a profit this year. I thought it was more newsworthy than your summary and -- frankly -- I get annoyed and feel like I failed whenever I post a summary and someone screams "slashvertisement" and gets modded +5 Insightful. That really does get to me. So instead of gaping in awe at how awesome they are at scanning your videos, I went with the profit angle. Especially since people have been so mixed on whether or not YouTube was a smart play by Google. Viacom trial lawyer fees aside, it's not a cheap outfit.

      You'll just have to beat me to the scoop next time ;-) good luck!

  • Was the articles about YouTube not having to pay (any/much) money for bandwidth and therefor not actually costing google any/much money incorrect?

    I thought that google losing over a million a day was proved to be false?

  • It's surprising how little flak youtube is catching in the comments to this story. I would have expected at least one sideways attack on youtube and its reason for existing.

    Usually, in any Xbox story regarding its earnings, we would already have gotten a detailed graph & analysis on how it could never pay back the initial costs before the heat death of the universe.

  • that it is the same year as the year of the Linux desktop?

  • Regardless, when you pay $1.65 billion for a business, you probably don't expect it to take three to four years before you start making your money back."

    Actually if you spend that much for a business, it would not be unreasonable to expect ten years or more. 1.65 billion is not an investment you make for a quick turnaround.

  • The same idiocy (Score:5, Insightful)

    by DerekLyons (302214) <fairwater@gmFREEBSDail.com minus bsd> on Friday September 03, 2010 @07:28PM (#33471526) Homepage

    "Regardless, when you pay $1.65 billion for a business, you probably don't expect it to take three to four years before you start making your money back."
     
    Once again, it's pretty obvious that the summary writer (like most slashdotters) knows roughly fuck all about business. Taking three to four years to start earning your money back is neither new, nor unique to Google, nor even notable.

  • Looks like it's just turning a profit for the current year. A milestone for sure, but a long way from the investment being profitable, though how you measure that is another question.

    If they paid $1.65b 4 years ago and lost half a billion a year for 3 years (to ~October 2009) and broke even for this year then YouTube would have to be worth around $5.5b by the end of this month just to "break-even" (in real terms) if we were to say that cost of capital+inflation etc is 15%. I seriously doubt a 15% return wo

  • Dear advertisers: If you put ads on top of the content, I will not buy your product. If I click your shit, it's because I missed the X button. I will make a conscious effort to never send a cent your way.

    Google: if you can't make a profit without running ads ON TOP OF your youtube videos, everyone will migrate to a site which can do so eventually.

It's a naive, domestic operating system without any breeding, but I think you'll be amused by its presumption.

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