Thursday, May. 14, 2009


YouTube is the largest video sharing site in the world. According to comScore, 99.7 million viewers watched 5.9 billion videos on in the US during March 2009. In November 2006, Google (GOOG) bought YouTube for $1.65 billion. There is a fairly good chance that the search company will never get a return on that investment. YouTube has not come up with a model to make money by either selling advertising or charging for premium content, even though it has an a enormous audience and library of content. Most of the video content placed on YouTube is of such low quality that marketers are reluctant to marry it with their messages. Google has said, in regulatory filings, that YouTube revenue is "not material." Forbes estimated that the site's 2008 sales were $200 million. Bear Stearns put YouTube's 2008 domestic revenue at $90 million. Recently, Credit Suisse estimated that YouTube will lose $470 million this year primarily due to the costs of the storage and bandwidth required to run the website. The same analyst said that YouTube will bring in $240 million this year, but that is only up 20% from 2008. If this analysis is even close to correct, YouTube would have to triple its revenue to breakeven. The New York Times recently wrote that "while YouTube, along with other new media properties like MySpace, Facebook and Twitter, is seen as leading the challenge against traditional media companies, the company itself is struggling to profit from its digital popularity." YouTube is big, but that has not made it a success.

Douglas A. McIntyre

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