April 20, 2009

YouTube Costs How Much?

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:
YouTube is not going anywhere, and Google will improve its profitability, but it is interesting to think of what a day without YouTube could buy.


  1. I think it'd be interesting to see statistics about what percentage of videos get what percentage of viewers. For example I wonder if the top 10% of videos get like 50% of all page views or something. Maybe one of the articles you linked to mentions that, but I'm too lazy to actually check it out.

  2. It has to follow pareto - 10% of the videos get 90% of the views. I could not find statistics, but I would call it a safe bet that the majority of video views are from a small percentage of videos.

  3. Interesting post. And I wouldn't be surprised if it's way less than 10% that get 90% of the views. Youtube gets 10+ hours of new video every minute.

  4. Some of these statistics are staggering - YouTube has 45 TB of video, and they grow 20% per month. This article says that "the most popular items get an exceptionally large percentage of the traffic." No hard numbers, but it's clear that most videos receive very few views.