Youtube Still Losing Tens Of Millions Of Dollars Per Year Claims Analyst

Although Google-owned YouTube has undoubtedly been a big hit in online video sharing domain, it is likely to face some serious financial repercussions this year, a financial analyst claimed.

Spencer Wang, a financial analyst with Credit Suisse, claimed that the renowned video-sharing website is set to lose a whopping $470 million this year.

Wang further predicted that while the website seems all set to generate as much as $240 million in 2009, up by 20 percent on year-over-year basis, its operational cost could go over $700 million, causing huge monetary losses to the parent company Google.

Elaborating on these hefty operational expenditures, the analyst claimed that the search engine giant have to spend around $711 million on bandwidth, ad-revenue sharing, sales and marketing, storage, licensing content, during the period.

With around $360 million a year, bandwidth cost accounted more than half of the total operational costs for the website, the analyst added.

Wang further attributed this loss to not selling advertisements on 97 percent of the pages of the site, coupled with huge expenses the company has to bear so as to allow a large number of users to watch videos on the website.

In order to help YouTube check such huge losses, Wang wrote in its report, “The issue for YouTube going forward is to increase the percentage of its videos that can be monetised (likely through more deals with content companies) and to drive more advertiser demand through standardisation of ad formats and improved ad effectiveness”.

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Our Comments

Youtube for Google is the equivalent of Skype for Ebay. Wildly popular services that have been purchased for billions but which have, up till now, failed to deliver significant revenue. Skype has managed to bring in around $600 million but Youtube has yet to contribute significantly to Google's bottom line. Now the problem is how long Google will want to pay for Youtube's expansion.

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