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.
RampRate Rise
But Credit Suisse isn’t the only company able to “deep dive into YouTube”, with IT consulting firm RampRate now having done the same. Its newly released figures tell a vastly different story however. Google is still in the red but the minus figures aren’t as depressing as before.
Even without challenging the Credit Suisse number crunching, RampRate suggests YouTube is looking at a maximum loss of no more than $174 million for the year. This is due to “peering for 73% of its traffic, buying bandwidth from some of the lowest-cost Tier 1 providers, using unprecedented bulk purchasing power to secure very favorable wholesale rates, and running data centers far away from expensive locales.”
Conspiracy Theories Abound
These factors result in YouTube’s bandwidth and infrastructure costs dropping from $711.3 million to $414.9 million. But if that were the case, and the Credit Suisse figures were far from the truth, why didn’t Google come out and publish the real facts and figures at the time in order to stop the speculation? RampRate even has a (conspiratorial) theory for that:
Google is no doubt thrilled to let YouTube be known as a financial folly. In the dangerous waters of online content, a whiff of potential profit is an irresistible lure for predators such as copyright lawyers circling user generated content monetization and content partners that are all too ready to turn on their distributors in a feeding frenzy.
Conclusions
hasn’t put all this effort into working out realistic figures for Google’s sake. It’s a company whose business is built on reducing the costs associated with IT infrastructure services, and this obviously provides a publicity-generating press release. So it comes down to who you believe in the end, and until Google discloses the real figures, we won’t actually know if YouTube is The Money Pit or not.
Meanwhile, new monetization efforts are being rolled out in order to push the revenue coming in above the costs going out.
