Dante Posted April 16, 2009 Share Posted April 16, 2009 Everyone knows that print newspapers are our generation's horse-and-buggy; in the most wired cities, they've been pummeled by competition from the Web. But it might surprise you to learn that one of the largest and most-celebrated new-media ventures is burning through cash at a rate that makes newspapers look like wise investments. It's called YouTube: According a recent report by analysts at the financial-services company Credit Suisse, Google will lose $470 million on the video-sharing site this year alone. To put it another way, the Boston Globe, which is on track to lose $85 million in 2009, is five times more profitable—or, rather, less unprofitable—than YouTube. All so you can watch this helium-voiced oddball whenever you want. As Benjamin Wayne, the CEO of the rival video-streaming company Fliqz, pointed out in a recent article for Silicon Alley Insider, not even Google can long sustain a company that's losing close to half a billion dollars a year. YouTube's problems point to a larger difficulty for many Web startups: "User-generated content" is proving to be a financial albatross. Two years ago, Time magazine named "you" its Person of the Year for doing your small part in fueling the Web 2.0 revolution. The magazine argued that by collecting and distributing the creations of millions of individuals, the Web is upending the way we learn about what's going on in the world around us. There's no doubt this is true; you experienced the presidential inauguration through millions of pictures captured by ordinary people, and a lot of what you learn these days comes from articles put together by the anonymous hordes who power Wikipedia. Yet even though they've changed the way we live, sites that collect and share content produced by all of us haven't done the one thing many tech evangelists said they'd do—make a ton of money. Or, in many cases, any money. There's a simple reason for this: Advertisers don't like paying very much to support homemade photos and videos. As a result, the economics of user-generated sites are even more crushing than those of the newspaper business. At least newspapers see a proportional relationship between circulation and revenues—when the paper publishes great stories, it attracts more readers, and, in time, more advertisers. YouTube sells ads on fewer than 10 percent of its videos. Credit Suisse estimates that 375 million people around the world will play about 75 billion YouTube videos this year. To serve up all these streams, the company has to pay for a broadband connection capable of hurtling data at the equivalent of 30 million megabits-per-second—about 6 million times as fast as your home Internet connection. All this bandwidth costs Google $360 million a year, the analysts estimate. Then there's the cost of the videos themselves: Even though many of the site's most popular content is uploaded for free from users, Credit Suisse says YouTube spends about $250 million a year to acquire licenses to broadcast professionally produced videos. Add in all other expenses, and the cost of running YouTube for one year exceeds $700 million. But the company makes only a fraction of that back in advertising—about $240 million in revenues for 2009, according to the report. YouTube isn't alone in Poor House 2.0. Yahoo bought the popular photo-sharing site Flickr in 2005, and though the service might be marginally profitable, it certainly hasn't added appreciably to Yahoo's bottom line. (Yahoo similarly doesn't break out Flickr's financials.) Facebook provides an even better example. The social network is running up a huge tab to store and serve up all the photos, videos, and other junk you stuff into your profile. Last year, TechCrunch reported that Facebook spends $1 million a month on electricity, $500,000 a month on bandwidth, and up to $2 million per week on new servers to keep up with its users' insatiable photo-uploading needs. (Members post nearly a billion photos every month.) But Facebook gets relatively little in return for storing all your memories. Ad rates on its network are terribly low, the company doesn't make a profit, and it hasn't shed any light on how it will make good on investments that valued the company at $15 billion. www.slate.com Link to comment Share on other sites More sharing options...
dwarf Posted April 16, 2009 Share Posted April 16, 2009 Kind of obvious that they'd advertise on less than 10% featured. Still interesting that they are making such a huge loss. Link to comment Share on other sites More sharing options...
Shino Posted April 16, 2009 Share Posted April 16, 2009 If I were google, I would send that content acquisition through the window, theses artists need youtube more than it needs them. Link to comment Share on other sites More sharing options...
EEVILMURRAY Posted April 16, 2009 Share Posted April 16, 2009 Kind of obvious that they'd advertise on less than 10% featured. Still interesting that they are making such a huge loss. If they're only advertising on less than 10% of videos it's not much of a surprise they're losing money. Link to comment Share on other sites More sharing options...
Jimbob Posted April 16, 2009 Share Posted April 16, 2009 Well, solution for this. Advertise on more than 10% of videos and re-aquire the music rights you once had Youtube and get your viewers back. Otherwise, its been nice knowing Youtube. Link to comment Share on other sites More sharing options...
dwarf Posted April 16, 2009 Share Posted April 16, 2009 If they're only advertising on less than 10% of videos it's not much of a surprise they're losing money. Well that's what the original statement implied, what I was saying is that most of the videos aren't worth advertising on because they are just home videos which are neither funny or interesting. Link to comment Share on other sites More sharing options...
ReZourceman Posted April 16, 2009 Share Posted April 16, 2009 A million dollars loss a day? Jesus. Crazy though, I'd be sad if YouTube left. My solution ; Introduce "YouTube Pro" yearly pay subscriptions, and add tonnes more adverts. Obv Pro has advantages etc. Link to comment Share on other sites More sharing options...
EEVILMURRAY Posted April 16, 2009 Share Posted April 16, 2009 Well that's what the original statement implied, what I was saying is that most of the videos aren't worth advertising on because they are just home videos which are neither funny or interesting. Maybe they should start on ReZ's, his top notch... entertainment is an untapped gold mine. Link to comment Share on other sites More sharing options...
ReZourceman Posted April 16, 2009 Share Posted April 16, 2009 Tr00 facks. I'm getting a steady stream of new subscribers now. About 1 every 3 weeks since about 3 months ago. Link to comment Share on other sites More sharing options...
dwarf Posted April 16, 2009 Share Posted April 16, 2009 Hehe steady stream. You're worth it though. Link to comment Share on other sites More sharing options...
Cube Posted April 16, 2009 Share Posted April 16, 2009 They should charge commercial companies to host content for them rather than paying them. Link to comment Share on other sites More sharing options...
Wesley Posted April 16, 2009 Share Posted April 16, 2009 A lot of the big companies host their own content fine enough... why would they then pay someone else to host it for them again... without complete control. That makes no sense. Link to comment Share on other sites More sharing options...
Shino Posted April 16, 2009 Share Posted April 16, 2009 A lot of the big companies host their own content fine enough... why would they then pay someone else to host it for them again... without complete control. That makes no sense. Because they're site isn't half as famous or as good a service as youtube is. Link to comment Share on other sites More sharing options...
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