The future of Youtube: Drain or Gain?

In March, Comscore, a marketing and research company, reported that, since January, internet viewers had watched 14.8 billion videos on Youtube. Tremendous traffic – and growing – on a site that has yet to turn a profit.

Google acquired Youtube for $1.65 billion in 2006, but despite a 43% market share and growing viewership, it continues to cost the company money – due to the costs incurred from maintaining the site and its bandwidth – instead of generating a profit. In a conference call in late August, Patrick Pichette, Chief Financial Officer, reassured Google shareholders that Youtube will soon be in the black. “In the not-too-long-distant future, we actually see a very profitable and good business. We are really pleased with the trajectory,” he said.

Although Google is still vague about how they plan to make the site profitable, they are making some progress. In mid-August, they announced that they had come to an agreement with Time Warner to show clips of popular shows on Youtube, including CNN and the Cartoon Network.

The San Francisco Chronicle reported on further measures in an article published August 24:

YouTube is now trying to make money from almost every way users interact with the site: from big banner ads when they land on the home page; to promoted videos like movie trailers or text ads when they search for content; to ads that run before, while or after they watch videos; to advertiser-sponsored contests that encourage them to create and upload their own content.

With Google’s ability to make money on aggregating content and Youtube’s outrageous popularity, it’s hard to imagine that Youtube will continue to be a challenge to the web company’s economic success for much longer.

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2 Responses to The future of Youtube: Drain or Gain?

  1. Between me and my husband we’ve owned more MP3 players over the years than I can count, including Sansas, iRivers, iPods (classic & touch), the Ibiza Rhapsody, etc. But, the last few years I’ve settled down to one line of players. Why? Because I was happy to discover how well-designed and fun to use the underappreciated (and widely mocked) Zunes are.

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