YouTube a drain on Google
While YouTube is undoubtedly one of the most popular sites on the web, recent figures show that Google are feeling some big financial pain from it. The delivery model behind YouTube means that much of the content delivered is not giving a return to Google.
Goggle hopes that the cost per impression for ads carried on YouTube will gradually increase over time to start generating more significant revenue, and of course YouTube carries some major brand recognition value.
But as things stand, YouTube is losing money in a big way – estimates from Credit Suisse suggest that YouTube will lose nearly $500 million USD in 2009. Google are a huge company, but no-one likes the thought of losing half-a-billion each year…
Google has been experimenting with various advertising models to get a better return but the figures suggest that the current CPM needs to be improved something like 30-40 times before YouTube would show a profit on the current model.
Sponsored content seems to be the way to go in order to get a more guaranteed return but how many people will be keen to watch advertorials and sponsored clips?
Google will no doubt live with the pain for a while but expect to see a shift towards sponsored content, and who knows, maybe a parting of the ways if they can’t find a cure…
