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YouTube still a loss leader for Google

YouTube is one of the most popular services in the world with a reported one billion active monthly users and six billion videos watched per month, but it might still be sinking money for Google.

In a new report by The Wall Street Journal (opens in new tab), YouTube is still managing to only break even after nine years under the control of the search giant.

The video streaming service brought in $4 billion (£2.56 billion) but managed to break even throughout 2014, due to data center costs and investments in original content and new hires.

YouTube’s big issue right now is the server costs, the 100 hours of uploaded footage every minute alongside the hundreds of millions of hours of viewed content every day take a toll on the server price.

Even though Google has rerouted most of the servers to its own data centers, it still needs to pay for maintenance and energy to power the servers, meaning the search giant still incurs a large cost.

One of the biggest reasons for the lack of profit is due to 50 per cent of users not watching YouTube directly from the homepage, but from linked or embedded videos, which generate significantly less revenue.

YouTube has tried to fix this problem with new investments in original content, making users want to check the homepage for new content, however this move has not made a lot of headway.

Google is also trying to push the idea of YouTube as a TV service, allowing users to “tune in” to different channels, rather than watch a funny clip.

AdBlock is another huge revenue scourge from YouTube. Around 50 to 80 per cent of YouTube users have some sort of ad-blocking software, and Google has not done a thing to stop these tools from being used, in fear users might turn tail on the video streaming service.

Google acquired YouTube for $1.65 billion (£1.06 billion) in 2006 and managed to turn it into the largest video service on the internet, but it is not exactly raking in the cash from the search and advertising giant.

David has been a technology journalist for over six years, covering a wide range of sectors. He currently researches apps, app sectors and app markets for Business of Apps, and has written for ITProPortal, RTInsights, ReadWrite, and Digital Trends.