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Why Isn’t YouTube Profitable? April 27, 2010

Posted by Chris Yates in PRCA 3330-PR Connections.
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Google acquired YouTube for $1.65 billion in 2006

 It’s hard to believe that YouTube is five years old already. What’s really amazing is the impact that the website has had on the social media landscape. It has become a legitamate marketing tool for several major companies, and the online community can’t get enough of it (over 1 billion videos are viewed daily now).  I found a neat little article, The Brief But Impactful History of Youtube, that gives a timeline of events for the past 5 years. See if you remember any of these:

  • April 2005 – “Me at the Zoo,” a 19 second video of co-creator Jawed Karim is first video posted on the site.
  • October 2005 – Nike becomes first major company to embrace YouTube’s promotional potential with a video of Brazilian soccer star, Ronaldinho
  • July 2007 – YouTube and CNN host their first presidential debate, featuring citizen-submitted video questions.
  • April 2009 – Susan Boyle’s audition tape for a British TV talent show is uploaded and viewed 80 million times. In December, her first album became the best-selling debut ever for a female artist.

     So all of this seems to indicate that YouTube is doing pretty well, but the reality is that since Google acquired it for over $1.5 billion in 2006, the website has proven to be a financial failure.  Analysts estimated in 2009 that YouTube earned revenue of at least $240 million, but the costs for storing and serving the site’s massive video library is in excess of $700 million. Some experts agree that the only reason Google doen’t shut down YouTube is becasue of the hefty price it took for them to buy it.

     This came as surprising news to me (especially the $700 million for video storage) because it seems like YouTube has already become a permanent fixture in our culture. It’s something to think about, but in the meantime, check out the very first YouTube video if you’ve never seen it.

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