Google acquired YouTube in November of 2006, for around $1.65 billion. It has operated as a subsidiary since then, but they have not been the breadwinner. According to Business Insider, YouTube is predicted to bring in $240 million in ad revenue in 2009 - not bad for a company that is 4 years old. But when that is weighed against their projected $711 million operating costs, YouTube is predicted to lose Google nearly $500 million this year. "A bitter pill to swallow," the article states.
YouTube began running ads with their videos to generate revenue, but they cannot charge enough per CPM(Cost per thousand impressions) because no one wants to watch the videos people put on YouTube. The article goes on to say that YouTube will continue to grow in 2009, but the amount of user generated (less appealing) content will continue to exceed the premium (worthwhile to advertise) content.
Hulu, YouTube's network-backed younger brother, got he online advertising right by providing users with content that they want to see. The number of unique visitors to Hulu pales in comparison to YouTube (6 Million vs. 86 Million). Hulu is projected to make $120 million in ad revenue this year, about half as much as YouTube. These are difficult predictions to make, but Hulu is much more efficient in generating revenue.
Why would Google continue the YouTube experiment? It's costing them around $1.4 million per day to run the site. Google cannot pull the plug on YouTube, but the Business Insider article did mention a few alternatives to monetize like subscriptions and premium content. Those would be great but they would change the YouTube community.
I would propose to shut down YouTube for one day per week - "On the Seventh Day, YouTube rested." Google could keep some of the money that the site loses everyday. Or they could donate it - which they love doing.
Experiment time: If the site were shut down for a day (I know you can't just pull the plug), then you could theoretically:
5 years ago