Youtube remains unprofitable 3 years after Google acquisition

http://dealbook.blogs.nytimes.com/2009/07/10/a-sun-valley-romance-three-years-later/?src=twr

by holaberlin • 17 years ago

22 30 17 years ago

dealbook.blogs.nytimes.com

it is not direct profits but it is indirect profits and strategic intentions as the reason google bought it. google wants you to use its services, the more you do the more you depend on them. video, voice, data, etc. they make profit as a whole, so you cant look at one unit and say it doesnt bring in profit. the longer you associate google with your video, voice and data needs they win.

tom_rath3• 17 years ago

Actually, the more you use Google's free services the more you cost them. It's the non-techies who are clicking their ads which are making money for Google so, for all their technical marvels, Google's revenue source(s) are pretty narrowly defined.

I can almost picture Steve Ballmer slapping his cheeks with a mocking "Oh, no! Google's dominating yet another money-sucking cost pit! Whatever shall we do?!?!" before bursting out in laughter.

moe• 17 years ago

I think Ballmer stopped laughing at google sometime between them crawling out of their garage 10 years ago and them approaching MSFTs market cap today.

req2• 17 years ago

Have you seen youtube comments? They probably are coming from the non-techies.

vijayr4• 17 years ago

exactly. how many of MS products are profitable? every successful company has a handful of ultra profitable/successful products, and a bunch of average ones, some that take years to start making profit (as will probably be the case in youtube) and many products that may never make any profit. google is just making sure they get into as many online/mobile biz as possible.

vijayr4• 17 years ago

video search isn't big today, but it'll probably be huge in the future, may be as big as text search if not bigger. same can be said about video advertising. at that time, who do you think is going to have tons of inventory at their disposal? Google

it is just part of a bigger strategy - text search, book search, audio/video search etc.

youtube is a long term investment. as long as G has money to keep it running/improving, they have nothing to worry about.

may be 5-10 years from now, the same ppl would say that the best investment that google made, is youtube.

patio11• 17 years ago

Video search isn't big today because there is exactly ONE use case for it: [heroes season 2]. Text search works perfectly fine for that -- you type in [heroes season 2], you will find Heroes, season 2. It is probably one of the best single domains for searching -- canonical or near canonical names for everything, with disambiguating numbers that users actually know, and built-in metadata which links all your canonical names together in a pattern users actually understand! Brilliant!

OK, so we've got Heroes season 2. Now we have the problem: do people want to pay money for it? Answer: well, no, not if they can get it free on Youtube. Piracy is Youtube's killer app. Unlike the iPod (piracy is the iPod's killer app, too, unless you think 20-somethings are filling 8 GB iPods at $1 a song), Youtube doesn't have plausible deniability or a convenient way to extract money from the pirates.

vijayr4• 17 years ago

what if I am searching for a particular scene (say a 2 min scene), in a particular episode of heroes, in a particular season?

calambrac• 17 years ago

Um, what? You really think the only use case for video search is finding particular clips with known titles? There's an entire industry around stock photos/videos that right now relies almost entirely on manual tagging, you don't think that field's ripe for search? Or the petabytes of video being streamed from security cameras, you don't think anyone out there wants to search that for faces or license plates or whatever? Video search is going to be absolutely killer, and Google's sitting on top of the largest, most varied training corpus in the world, thanks to YouTube.

abstractbill• 17 years ago

He cited research from Credit Suisse

Seriously? People are still citing that hack-job of an analysis? It didn't even take peering into account - it was ridiculous.

kierank2• 17 years ago

Not sure why this guy is being downvoted. He's right.

DarkShikari• 17 years ago

It's true across the tech community; someone can post a completely wrong analysis of pretty much anything and as long as it fits peoples' expectations, they'll keep citing it even if it's wrong, and it's incredibly aggravating.

Some common examples include Windows having a lower TCO than Linux, Theora being better than H.264, and of course practically anything in the realm of politics.

kierank2• 17 years ago

I think this is getting more and more common because of so-called "tech" bloggers not fact-checking their stories and generally overhyping social media (twitter/facebook/youtube etc..) because of their relative simplicity compared to something like the intracacies of bandwidth economics.

Unlike traditional journalists (though clearly not the NYT!) these guys don't have black books of knowledgable people to call up and ask on a certain issue.

Social media makes everyone's opinions and views a lot more equal (when really they shouldn't be) and these stories eventually bubble up to traditional media, which have the view that since the whole "blogosphere" is talking about it as fact; it must be fact.

andres• 17 years ago

It's been a while since I learned something new from a nytimes tech article.

Loopy• 17 years ago

This probably doesn't surprise anyone but their current business model is terrible. Why would anyone click on a text based ad which distracts them from the video they want to watch. I don't see why anyone would voluntarily do that. At some point google is going to have to bite the bullet and have video ads. Even if they are on after a video is shown they would be far more effective and desirable for advertisers.

jfoutz2• 17 years ago

Because, if youtube is ever profitable, they will be sued. over and over until the end of time.

much better to just miss breaking even. Shovel all the user data into doubleclick, and all the video data into crazy data mining algorithms.

_cbsz2• 17 years ago

On the surface, your argument has intuitive merit. However, you don't sue a business unit (Youtube), you sue a company (Google). Google is profitable.

snewe• 17 years ago

Important point about the cost of the original acquisition:

"Even so, it’s important to remember that Google paid for YouTube in stock, not cash, that represented a tiny fraction of the company’s total market capitalization. (The deal was initially valued at $1.65 billion.) And immediately after the merger was announced, Google’s shares rose, which in some sense seemed to pay for the deal on its own."

ShabbyDoo• 17 years ago

Google may be playing up the notion that YouTube is very unprofitable. Making VCs think that online video is a bad business will help reduce new competition. And, unlike eBay's Skype acquisition, there's probably little shareholder pressure for Google to prove that it made a good choice.

zandorg• 17 years ago

My general calculation on YouTube is this:

-At Google Search, you do a search and get a text ad. Each text ad is about 400 bytes, each search page (with your results) is around 5k. Serving up the webpage is done from another site.

-At Google YouTube, you do a video search and get a text ad alongside it. Each text ad is 400 bytes, each search result you look at (eg, video) is about 2MB.

So, are you going to make as much, after paying for bandwidth, with a factor of 400 (2,000,000 / 5000) difference in bandwidth?

Youtube remains unprofitable 3 years after Google acquisition

Related Stories