Analyst Opinion – It’s been two-and-a-half years since Google bought YouTube for $1.65 billion. At the time, the 18-month-old online video sensation was struggling to figure out how to convert its immense popularity into sustainable revenue. It’s still struggling. Which begs the question: Will Google’s patience eventually wear out?
It’s a valid question. Figures just released by Credit Suisse project $711 million in YouTube-related operating costs through 2009. A relatively paltry $240 million in ad revenue leaves parent Google $471 million out of pocket. As the deepening recession continues to send advertisers scurrying for cover, it’s increasingly clear that these numbers won’t improve anytime soon. How much longer can Google keep footing the bill?
Storing and distributing all those videos of kids making fools of themselves in their backyards and pets destroying the house isn’t cheap. While some conventional media providers have toyed with charging subscriptions, I doubt anyone would pay to see teenagers falling off their skateboards. After four years of free YouTube, users feel entitled, and will quickly find other ways to share teen-skateboard videos if YouTube initiates subscriptions.
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