YouTube: Profits Still In The Pipeline
YouTube is growing at a staggering rate, but its profits are always just round the corner, says David Jamieson
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The other side of the coin
But the numbers also tell another story. Hosting and managing the sheer volume of content is costly (although no-one knows exactly how costly), as is managing the inventive ways to make money from it.
Copyrighted content that is uploaded is spotted by YouTube’s proprietary automatic Content ID system, which scans and compares video and audio with reference material provided by rights holders. This must consume enormous computing power.
Google told journalists in London in March last year that 33 percent of the thousand people said to have signed up to this scheme chose the revenue sharing option – not a great deal for something more than two years old at the time.
It was also reported that the two billion videos with ads that were watched each week last year made up just 14 percent of the total weekly views. So they were in effect subsidising the remaining 86 percent.
And one third of that two billion featured copyrighted material with ads working on the revenue sharing basis, so YouTube won’t have kept all the revenue for themselves.
Innovating in the right direction
But Google continues to innovate in the right direction. Google TV is designed to grab a share for YouTube of the five hours of TV US consumers watch all day. Pay per view video rental and broadcasting of live events is also in the pipeline.
A social media website that deals in similarly huge numbers is Facebook – it apparently now has the eyeballs of 750m people.
In January this year eMarketer reported Facebook as serving 50bn display ads per month, on course for a trillion in a year and raking in $1.86bn for ads alone.
But Facebook’s content is cheaper and easier to manage than YouTube’s, and less likely to run into obstacles such as copyright infringement.
It is still quite a leap of the imagination to conclude just yet that an organisation with Google’s experience won’t be able to turn YouTube’s volume of traffic and content into profit.
In heady days when the very best tech startups, like YouTube, are again worth billions within just a few years, we’re often surprised when the major players don’t make major money. But just maybe, this could be the year…
