Saturday, May 30, 2009

YouTube popular, but wildly unprofitable

Why is it that photo-sharing sites can charge users for unlimited storage, but Google’s YouTube allows people to store unlimited amounts of video on its site for free?
That can’t be a sustainable business model.
I like free services on the Web as much as the next guy, but ultimately they’re businesses not charities.
Consider YouTube. Search king Google bought the popular video-sharing site in 2006 for $1.65 billion, but hasn’t figured out a way to profit from it. In fact, YouTube is losing money by the truckload.
YouTube reported May 20 on its blog that users are uploading 20 hours of video a minute to the service. To accommodate that, Google has an enormous bill for bandwidth and data storage.
Market research firm eMarketer posted a report last month that compiled estimates of how much revenue YouTube generates and how much the service costs to operate. Analysts estimate that YouTube could bring in advertising revenue of $120 million to $500 million in 2009. But the cost of running the site could reach over $700 million this year.
It’s no wonder that Time on May 14 listed YouTube as one of “The 10 Biggest Tech Failures of the Last Decade.” Others on the list included Microsoft’s Windows Vista, Gateway, HD DVD, Vonage, Sirius XM, Microsoft Zune, Palm, Iridium and Segway.

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