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Innovation

YouTube profit (and revenue) watch intensifies

Google has made profiting from YouTube a big priority in 2008, 2009 and beyond and the video site's potential is being monitored closely amid a weak ad market.Sure YouTube founder Chad Hurley wants to conquer every screen.
Written by Larry Dignan, Contributor on

Google has made profiting from YouTube a big priority in 2008, 2009 and beyond and the video site's potential is being monitored closely amid a weak ad market.

Sure YouTube founder Chad Hurley wants to conquer every screen. In a blog post Hurley wrote:

Our goal is to allow every person on the planet to participate by making the upload process as simple as placing a phone call. This new video content will be available on any screen - in your your living room, or on your device in your pocket. YouTube and other sites will bring together all the diverse media which matters to you, from videos of family and friends to news, music, sports, cooking and much, much more.

While Hurley is outlining grand vision statements the rest of us monitor YouTube's profit potential. To wit:

  • Google has launched audio indexing of YouTube videos. News.com's Stephen Shankland outlines the details, which revolve around politics for now, and makes the following leap:

Extracting words from videos could make it easier for Google to determine what content is in the video and therefore what ads are most appropriate to show next to them.

  • Piper Jaffray analyst Gene Munster says in a research note that YouTube is weathering a display ad downturn well since 31 percent of the site's videos have some ads in them, up from 22 percent in May.
  • Munster adds that YouTube is adding pre-roll ads, "a new form of advertising on YouTube."

Add it up and you'd think YouTube was well on its w

ays to profit euphoria. However, it may be prudent to curb your enthusiasm. Munster (estimates at right) reckons that YouTube will represent less than 1 percent of revenue in 2008. In 2009, Munster reckons YouTube will be 1.5 percent of gross revenue.

Simply put, YouTube will have a tough time moving the needle for Google. Meanwhile, YouTube should be weathering the display ad downturn since it's operating from a small base. YouTube should have hockey-stick-like ad growth for years to come because it's starting from almost nothing.

On the bright side, Google has been swapping in AdSense display ads for its text ads on YouTube. Display ads accounted for 73 percent of YouTube's total this month compared to 58 percent in May. Here's the breakdown:

As worries grow about the ad market YouTube's monetization potential will increasingly be put under the microscope.Also see: YouTube’s new APIs and how Google will monetize them

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