Analysts say YouTube might lose $470 million

Mon 6 April 2009 11:40, Bas van den Beld

Analysts say YouTube might lose $470 million

The Web works in mysterious ways. Sometimes you wonder how some services keep on existing. Twitter and YouTube are two examples of the strange way the web works. A huge amount of users, but no business plan or ways of getting the hard cash.

Analysts from Credit Suisse now have calculated that the most popular video service of all might be losing no less than 470 million dollar in 2009.

The huge loss, an ecquivalent of almost 347 million euros, is being caused by the high costs of the service. The cost of bandwidth, content licensing, ad-revenue shares, hardware storage, sales and marketing and other expenses ad up to about 711 million dollar, while on the other end YouTube will make about 240 million dollar in revenue.

So on the one side there is the increase of revenues (over 20%) while on the other side the costs are growing. Is this ever going to change? With the current model it doesn't seem like that.

"In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetized (likely through more deals with content companies) and to drive more advertiser demand through standardization of ad formats and improved ad effectiveness," the analysts say. But they also predicted YouTube will serve 75 billion video streams in 2009, 38% more than in 2008. With 375 million unique visitors the site keeps on growing in use.

Most costs are being made in bandwith. 51% of expenses goes to this area. With the site growing as rapidly as it is now chances are that the costs will only keep on rising. The revenues will not be able to catch up with these costs. YouTube has to wait for new techniques to make it profitable.


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