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Innovation

Google moves to show YouTube has 'a very credible business model'

Google on its second quarter earnings call went out of its way to say it was pleased with YouTube's "trajectory" and indicated that the company would make money on the video site. The motive: Combat a bevy of worries about YouTube's profit potential.
Written by Larry Dignan, Contributor on

Google on its second quarter earnings call went out of its way to say it was pleased with YouTube's "trajectory" and indicated that the company would make money on the video site. The motive: Combat a bevy of worries about YouTube's profit potential.

YouTube monetization has become a hot issue among analysts following Google's second quarter earnings report. Some like Bernstein's Jeffrey Lindsay and Piper Jaffray's Gene Munster have talked YouTube implementing fees for uploads and all sorts of models. Fast Company call these fees a big awkward problem. Finding the business model for YouTube has become a bit of a parlor game these days. Munster reckons that YouTube will have $323 million in gross revenue in 2009, but that costs outstrip revenue. Munster writes:

"We estimate YouTube will generate $323 million in gross revenue for 2009, up from $111 million in 2008. However, expenses for site upkeep and streaming are likely to total more than the gross revenue generated. We believe YouTube could develop a hybrid model where it charges a portion of users to upload their videos. YouTube could develop technology based on its current Video Identification technology to protect copyrights to determine whether advertising could be sold against the video to be uploaded. If the algorithm deems Google could not monetize the video through advertising, it could require the user to pay a nominal fee to upload the video to the site, which could be based on the average lifetime cost of streaming for a given video."

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