Big-hitting and ever-popular shows such as The Simpsons and CSI now carry a higher advertising rate on the Web than they do on television. Is this the moment we have been waiting for - when the digital revolution starts to pay for itself?

I Have A Dream

It seems as though everyone, with the exception of the cable companies who need the status quo to continue in order to make money, is keen for online video to fulfill its potential and herald a new revolution in this digital age. There are just a couple of problems, huge problems at that, to overcome before this dream becomes reality.

One is for content creators and copyright owners to realize the world is one place connected by the Internet, rather than a fragmented jigsaw puzzle. Which means making Hulu viewable outside the States and the BBC iPlayer viewable outside the U.K. The other, even larger, problem, is how to make Web video profitable without scaring viewers away by charging the earth for streaming content.

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Everyone knows YouTube is losing lots more money to run than it’s bringing in, right? Wrong. Sure, a Credit Suisse report suggested as much earlier this year but the figures may not actually stack up. In fact, new research suggests YouTube may actually be close to breaking even.

YouTube may be massive, both in terms of popularity and the sheer amount of content, but it isn’t yet a moneymaking proposition for its owners, Google. Even Google admits this quite readily. But the situation may not be as bad as a Credit Suisse report published in April of this year implied.

Credit (Crunch) Suisse

That report by Credit Suisse analysts, Spencer Wang and Ken Sena, was widely reported. It was titled, ‘Deep Dive into YouTube’, and basically made educated guesstimates about what money Google can expect to see coming in to YouTube during 2009. The numbers were not a pretty sight.

Although Credit Suisse estimated YouTube would make $240 million in revenue this year, that figure would be countered by operating expenses of an estimated $711 million. Even the least educated industry watcher can see these figures, if true, would result in an annual loss of £471 million over the course of a year.

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Google is continuing to struggle to make YouTube profitable. All those eyes watching the site should be worth a mint, but turning viewers into revenue isn’t as easy as it sounds. Maybe giving users the choice of which adverts to watch is the solution?

Monetizing YouTube

YouTube is by far the biggest online video site on the Web. The number of viewers watching videos every day is huge, as is the number of videos uploaded to the site every day. But despite these statistics, YouTube is still not profitable, and maybe never will be.

The success of YouTube is actually part of the problem because it means the costs involved in storing and delivering all that data to all those people are mind-blowing. Another problem is monetization. The vast majority of YouTube videos cannot even be monetized, and delivering ads on the ones that can is a tricky balancing act.

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To hear that YouTube is the most popular, most visited, and most content-filled online video site on the Web is hardly surprising. However, to hear that 20 hours of video is uploaded to the Google-owned site every minute is surprising. And to hear YouTube still wants more is nothing less than a shock.

YouTube Stick

YouTube has been getting rather a lot of stick of late. Mainly because it’s facing stiff competition from Hulu, the (at present) U.S.-only online video service. While Hulu deals exclusively in premium content, YouTube made its name, and continues to do so, with user-generated content. You know, videos of babies gurgling or dogs riding skateboards.

The problem for YouTube is that while legally-obtained content from media companies and TV networks is fully-monetizable and consequently profitable, UGC generally isn’t. Mainly due to the risk of copyright infringements occurring. And seeing as 96 percent of YouTube videos are currently estimated to be UGC, this is a problem.

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YouTube has, for a long time, been the king of short-form content. And despite various pretenders to its crown, this looks likely to remain the case. But what about long-form content? Which is currently the domain of services offering premium content such as Hulu (in the States) and the BBC iPlayer (in the UK).

The Long and Short Of It All

There has been speculation for a long time that youTube is going to roll-out a redesign which focuses more on long-form content such as episodes of TV shows and movies rather than the mostly user-generated short-form content which has been the site’s bread and butter since it began.

The reason for this is purely one of money. As traffic-worthy and entertaining as short-form content is, it rarely makes any money. Mainly because it’s almost all user-generated and unable to be monetized. Whereas long-form videos, premium content acquired through deals with third-party media companies is ripe for monetizing.

More Long-form On Way

YouTube’s efforts to secure long-form content have been patchy so far. It has managed to grab some independent films, and episodes of classic television shows such as Star Trek: The Original Series. But only a fool would think that these alone could turn YouTube into a site as revered and renowned for long-form content as Hulu is.

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Each month, several companies release viewing figures for online video. This month was no exception, although the huge difference in figures for Hulu over the last quarter shows there is still much work to be done in the field of online video metrics.

Online Video Metrics

Online video metrics, the study of traffic and viewer numbers to the various online video companies, is clearly a tricky business. The figures are released every month by different companies, most notably Nielsen, comScore, and Quantcast. Unfortunately, all three sets of figures tell a different story.

The figures for April were released earlier this week and taken individually didn’t really offer too many surprises. YouTube is still way out in front, MTV saw an unexplained increase in viewer numbers, and Hulu, well it really depends who you listen to in Hulu’s case. The U.S.-only video site may either be doing really well or really rather badly, depending on which company you choose to believe.

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Product placement has been a mainstay of movies and television shows for years now. But with some content creators utilizing the method to make money from sponsorship deals, YouTube isn’t too happy at being left out of the money-making loop.

The YouTube Profit Conundrum

YouTube’s continuing effort to make money is a recurring theme seemingly every week. Despite this, the site is still expected to make a loss for its owner Google this year. Although revenues are up, so are operating expenses, leading to a possible $471 million this year. It’s a good job that Google is so monetary-wealthy that a loss of that size is almost meaningless.

However, Google isn’t going to idly sit back and watch YouTube continue to lose money, especially as the traffic coming to the site on a monthly basis indicates it should be making a healthy profit. Hence the trialling of new advertising methods, the changes in content strategy, and an unwillingness to bow to the profit-sharing demands of record labels and associated organizations.

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