YouTube Expected To Lose $470 Million In 2009

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As a follow-up to my post last Friday, where I covered news of video sharing site Veoh slashing their workforce by 36%, comes news about YouTube, the 800 pound gorilla in the market (Google owned YouTube is responsible for approximately 41% of all video streams on the Internet).

While Google has admitted that YouTube has never turned a profit, they never stated any specific numbers.  So analysts from Credit Suisse went about looking over YouTube’s balance sheet.

And what did they find?

YouTube is poised to earn $240 million in 2009…a respectable 20% increase over the prior year.  That’s the good news.  Now here comes the bad.

It’s projected that Google will spend $710 million running YouTube in 2009.  The math is simple.  That’s a loss of $470 million in a single year.  Kind of like having a $710 mortgage, but making only $240.  And roughly half of those expenses ($355 million) are for bandwidth alone.

YouTube became popular because of user-generated content.  And it’s that very content that is killing them (as well as about every other video sharing site on the Internet).  Advertisers won’t touch user-generated content.  In fact, only about 3% of the videos on YouTube earn advertising revenue.

The analysts from Credit Suisse concluded that YouTube needs to include more paid content to remain financially viable.  And Google is not blind to this fact.  They recently announced deals with Disney and ESPN for dedicated content channels.

The hope is that this infusion of cash will keep the hosting of user-generated videos do-able (you know, the 97% of videos on YouTube that do nothing but lose money).

But will it or won’t it keep user-generated videos afloat? That’s impossible to predict.  What is known, is that for everything Google has their hands in…nearly every penny they make still comes from only one source; Adwords.  That’s not necessarily a great track record for diversity.

So if you’re a business owner or Internet marketer who believes (or has been led to believe) that YouTube is the holy grail for traffic and profits, the question is this; what will you do if YouTube (and others like it) fail?

2 comments

  • Anyway you look at it, YT is still (and will continue to be) at the TOP of the Video Marketing food chain (although) I admit, I’ve been tracking the Vid count on eHow.com and I like the progress therein.

  • Ok, so let me get this straight…Revver went under (basically), Veoh is converting to a search engine and YouTube is losing an astronomical $39,000,000 a month!

    Who are the next players to tank in this space? Metacafe? Daily Motion? Crackle?

    After three years of web video, can anyone name a web video site that is actually making any money?

    Anyone?