Does YouTube Make Money?
YouTube, the 4th most visited website on the web according to Alexa or 5th according to Nielsen Online who say it had over 83 million unique visitors in February. It is visited by a staggering 20% of all global internet users. Compete.com also has in depth statistics on YouTube and estimate it was visited by 85 million unique visitors in July 2009.
With such a large reach and number of daily unique visitors you would think it would be fair to assume that YouTube is making a hella lot of money. In 2008 it is unclear as to what YouTube’s revenue was and different sources have released different figures:
Forbes estimated YouTube would pull in $200 million in 2008 and $350 million this year.
- Jefferies & Co., 2009: $500 million
- Bear Stearns, 2008: $90 million
- Screen Digest, 2009: $120 million
- Forbes, 2008: $200 million; 2009: $350 million
- Morgan Stanley, 2008: $75 million to $189 million
- Credit Suisse, 2009: $240 million
Google spent $1.65 billion for YouTube in November 2006. YouTube was a small video distributor in San Bruno, Calif with only 63 employees. In 2006 YouTube’s number of video clips eclipsed revenues but how much revenue is it actually pulling in now? The above figures show its revenue but sadly don’t take into account the costs involved of running such a large number of video clips.
YouTube has got the huge number of unique visitors and so is now focusing on getting ads and making money.
Google’s YouTube is the internet’s most popular video site but could be on track to lose $470 million in 2009, according to Credit Suisse. YouTube commands a 41% share of total domestic video streams but has yet to break into profit. Credit Suisse have said that the site is on track to generate $240 million in 2009, up about 20% year over year.
The cost of YouTube is staggering. It is not free to host videos and YouTube are certainly paying for it. The cost of bandwidth, content, ad-revenue shares, hardware storage, sales and marketing and other expenses will total almost $711 million. Bandwidth alone covers 51% of expenses – at $1 million a day – with content licensing accounting for 36%.
Credit Suisse project YouTube will provide 75 billion streams in 2009 which is a 38% increase on 2008.
Emarketer estimates that web video ad spending will increase from $775 million last year to $1.35 billion this year. YouTube accounts for just 1% of Google’s sales, but that is still a massive increase on last year.
So Google need to come up with a way of monetizing YouTube. It appears that rival Hulu [Traffic Statistics], despite serving only a fraction of the videos in comparison to YouTube, is making almost as much as YouTube. Hulu has a 2.6% share of the US online video market, whereas YouTube has 40.9%. Look at revenue per viewer and Hulu beats YouTube by a mile.
This is due to the fact Hulu have bought licenses to all their videos meaning that there are no user uploaded copyright infringing videos. This allows Hulu to run ads on 100% of their videos when compared to YouTube only being able to on around 3% of their videos.
The truth is that premium content is really where the money is. Adverts on a home video are much less likely to make money than if they were on the latest episode of Lost. Hulu is also only available to the U.S which means that bandwidth is only being spent on the people that are most likely to make money from ads.
Hulu’s revenue last year was almost $100m. After paying for these content licenses its net revenue was between $10 million and $20 million.
Who knows what’s going to happen but it’s clear YouTube must continue in finding ways to monetize their huge amount of traffic. YouTube definitely has the muscle to get advertisers’ attention.
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