Wednesday, July 09, 2008

Google GOOG YouTube will continue to be a money drain.

News are old, but with a new meaning in the recession times: Google can not monetise its 1.65 billion investment, revenues are not material (200mil for 2008 is estimated) and it is officially a money drain from other profitable business. When you consider running costs for all those blades and bandwidth eaten by huge video traffic the picture will become even more bleak.
"Of course, one other obvious solution to YouTube's sales woes would be to simply start advertising on YouTube pages, period. Nearly any page you see on the site today is ad-free. But Google is showing a billion clips a day. Why not simply start loading some of those pages with AdSense units?
Because of the other big admission in the WSJ story -- Google is afraid to sell ads on 96% of its inventory:
Fearful of fueling allegations that it is profiting from copyright infringement, Google will only sell ads against YouTube clips that have been posted or approved by media companies and other partners -- roughly 4% of the total, says one person familiar with the matter.
The story ascribes Google's fears to the billion-dollar Viacom suit, but we think that's not fair: Even if Philippe Dauman ends up settling with Google, it's not going to resolve the copyright cloud hovering over YouTube. So either Google's going to need a legal ruling that gives it the go-ahead to make money on its copyright-violating inventory -- or it's going to have live with diminished expectations for its $1.65 billion business."

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