It seems that YouTube is finally ready to start turning a profit for Google. I didn't know this, but apparently YouTube has never been profitable before, even with revenue in the 100s of millions of dollars. I know server costs must be huge, with over 12.2 BILLION videos, but come on! The price of advertising on that site must be huge! There must be so many opportunities to exclusively release companies' videos on the site and then pitch targeted advertisements at the viewers. It doesn't seem like it should be a huge deal.
Anyway, this year they are expecting their revenue to increase by 55%, to $700 million. This will finally give them a profit. I'm sure that Google knows what they're doing. They're huge after all. I mean, if they're able to butt heads with China, they have serious pull.
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This surprises me! I never would have guessed that YouTube is just beginning to turn a profit, especially considering how many ads are on the site.
ReplyDeleteWho would have thought Youtube wasn't making money. But I guess thinking about it, it does kind of make sense that they have a huge server cost, I never would have thought it they would have had over 12 billion videos. Still though, it must have been a pretty risky move for google to go a head and buy youtube.
ReplyDeleteI'm also very surprised about this. This whole movie trailers have been airing on youtube no one has made a profit from it. Especially now that they began running commercials before playing certain videos i hope they are making a profit out of all of that because if not the lost some many opportunities to make a profit.
ReplyDeleteSo here's what I'm wondering:
ReplyDeleteIf YouTube doesn't make a profit, then what about other smaller sites like Flickr or Digg? I think all of these different channels for media ultimately provide internet users with a more dynamic and overall better web environment, but what happens when the companies behind the sites go bankrupt and they have to shut down their web pages? What happens to all of the users who depend on the services that these sites provide?
Lots of questions, I know. If YouTube can't make a profit, how is anyone else supposed to? Especially in the long run.
Wow. I'm surprised because I assumed that YouTube would make millions from ad revenue alone!!! What I want to know is why will their profits increase so dramatically this year?? 55% is a huge increase...
ReplyDeleteWhile it is surprising that Youtube has never turned a profit before this point it seems like google made a good move. If revenues increased by 55% this year and Youtube continues to grow at its current rate, Google could make a lot of money off of this. A
ReplyDeleteThats crazy to think Youtube will be making its first profit after this year. Again with what everyone said above me with all the movie trailers, ads, and etc. on Youtube i find it amazing they havent figured out a way to make a profit until this year. Seems to me like they werent running there company very well.
ReplyDeleteIf you think about it though, most ads were only initiated fairly recently. The introduction of ads is probably where this large increase is coming from.
ReplyDeleteI'm surprised that after so many years of youtube being a sensation on the internet and billions of videos being posted on the site that just now they are goin to increase to a 700 million dollar revenue. It seems to me that if you were that big of a company and not making a profit you would have been lookin for a way to use ads and other types of revenue so you could make a profit every year.
ReplyDeleteHAH. I love Google for finally standing up to China, it helps relinquish the governments control, and adds a little bit more capitalism to the largest population on the planet, in a sense anyways. It's going to be interesting to see if this incident causes a domino effect with other western companies, are more going to stand their ground further eroding the countries might or will there be an enormous crackdown that would make such actions impossible?
ReplyDeleteIt actually makes sense to me now...
ReplyDeleteOk, so I read a little and apparently YouTube used to lose money because the cost of hosting videos online is ridiculously high. The problem with this is that YouTube and similar sites allow users to upload videos freely, and so the costs can increase very quickly.
Google looks at this situation and decides to buy YouTube, they eat its losses for a few years as hundreds of thousands of videos are added on a daily basis.
And yet Google profited $1.5 billion more in its first year with YouTube than it did in the previous year. How is this possible if YouTube loses so much money?
I'll tell you how: YouTube currently accounts for about 10% of all internet traffic in the world. As other video hosting sites began to go out of business their users migrated to YouTube, and more and more videos were added to the site. As more videos were added more people's interests were on YouTube, and so internet traffic increased.
When more people use the internet, more companies want to advertise on the internet. Google makes most of its money from advertising, and the increase in demand for internet advertising increased Google's profits, but not YouTube's.
YouTube's unprofitable status actually decreased competition; not only were smaller video hosting sites running out of money, companies would not enter into an internet venture if Google--the #1 internet company in the world--couldn't even turn a profit.
YouTube is now the third most-visited website in the world (behind Google and Facebook), and it's finally going to make a profit. Michael's mentioning of ads has made me realize what happened: Google kept YouTube in the red on purpose.
Google knew that it had so much more capital than YouTube's competitors that it could eat YouTube's losses, minimize the amount of ads on YouTube, pay for larger servers to host more videos, conduct research in order to improve the site, and still make money from other ventures. Google took losses in order to ensure that customers would believe that YouTube was better than every competitor; they didn't post ads, their videos loaded faster, they had HD videos, and they had more videos than any website in the world.
YouTube has now grown so popular that it absolutely dwarfs the competition; the second-largest video hosting website in the world is Hulu, the 161st most visited site that doesn't allow user uploads and features mostly corporate videos. Now that YouTube is securely fastened at the top of the hill and its competitors have all but vanished, Google is posting ads all over YouTube, and YouTube will make a profit this year for the first time.
Google made a BRILLIANT economic scheme here; it didn't muscle-out the competition, but rather it used YouTube to increase internet traffic in a manner that made up for its losses, and then it intentionally lost money on YouTube in order to attract the widest possible audience. YouTube was an offer that was too good for internet users to refuse; there were no ads, the most videos, the best quality, the fastest speed, and free, unlimited video uploads.
However, Google has begun to post ads on YouTube, which will be profitable for the first time this year. Google planned this all along; it weakened YouTube's competition to the point of failure and strengthened YouTube to the point of absolute control of the market. Google intentionally turned the market for video hosting websites into a YouTube-controlled monopoly.
Well I can't believe such a huge website has just started to make profit...If so, how can it increase the revenue by 55% in one year? I mean, there will be more ads but also more videos uploaded though, the server cost will keep increasing.
ReplyDeleteWeiwei:
ReplyDeleteThe fact that new videos will be added will only increase YouTube's size and thus the number of pages on which it can post ads. Nobody made money as video hosts before because there was too much competition; several sites were receiving a majority of the internet traffic. However, now YouTube has a staggering majority of all the visits it can be profitable.