

Youtube remains unprofitable 3 years after Google acquisition - holaberlin
http://dealbook.blogs.nytimes.com/2009/07/10/a-sun-valley-romance-three-years-later/?src=twr

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abstractbill
_He cited research from Credit Suisse_

Seriously? People are _still_ citing that hack-job of an analysis? It didn't
even take peering into account - it was ridiculous.

~~~
DarkShikari
It's true across the tech community; someone can post a completely wrong
analysis of pretty much anything and as long as it fits peoples' expectations,
they'll keep citing it even if it's wrong, and it's incredibly aggravating.

Some common examples include Windows having a lower TCO than Linux, Theora
being better than H.264, and of course practically anything in the realm of
politics.

~~~
kierank
I think this is getting more and more common because of so-called "tech"
bloggers not fact-checking their stories and generally overhyping social media
(twitter/facebook/youtube etc..) because of their relative simplicity compared
to something like the intracacies of bandwidth economics.

Unlike traditional journalists (though clearly not the NYT!) these guys don't
have black books of knowledgable people to call up and ask on a certain issue.

Social media makes everyone's opinions and views a lot more equal (when really
they shouldn't be) and these stories eventually bubble up to traditional
media, which have the view that since the whole "blogosphere" is talking about
it as fact; it must be fact.

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vijayr
video search isn't big today, but it'll probably be huge in the future, may be
as big as text search if not bigger. same can be said about video advertising.
at that time, who do you think is going to have tons of inventory at their
disposal? Google

it is just part of a bigger strategy - text search, book search, audio/video
search etc.

youtube is a long term investment. as long as G has money to keep it
running/improving, they have nothing to worry about.

may be 5-10 years from now, the same ppl would say that the best investment
that google made, is youtube.

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patio11
Video search isn't big today because there is exactly ONE use case for it:
[heroes season 2]. Text search works perfectly fine for that -- you type in
[heroes season 2], you _will find_ Heroes, season 2. It is probably one of the
best single domains for searching -- canonical or near canonical names for
everything, with disambiguating numbers that users _actually know_ , and
built-in metadata which links all your canonical names together in a pattern
users actually understand! Brilliant!

OK, so we've got Heroes season 2. Now we have the problem: do people want to
pay money for it? Answer: well, no, not if they can get it free on Youtube.
Piracy is Youtube's killer app. Unlike the iPod (piracy is the iPod's killer
app, too, unless you think 20-somethings are filling 8 GB iPods at $1 a song),
Youtube doesn't have plausible deniability or a convenient way to extract
money from the pirates.

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vijayr
what if I am searching for a particular scene (say a 2 min scene), in a
particular episode of heroes, in a particular season?

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ori_b
How can you automatically detect that from a video? And if instead of
automatically detecting it, you just let the users tag the video, why does
text search not work? Finally, even if they manage to get a useful video
search working, why do they need Youtube for it, when they can crawl the web
for video?

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RK
One thing you can search is closed captioning, like SnapStream does:

<http://www.snapstream.com/tvtrends/>

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jokermatt999
YouTube has also added a closed captioning feature, but I'm not sure how it is
done. I assume this is also working towards video search.

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snewe
Important point about the cost of the original acquisition:

"Even so, it’s important to remember that Google paid for YouTube in stock,
not cash, that represented a tiny fraction of the company’s total market
capitalization. (The deal was initially valued at $1.65 billion.) And
immediately after the merger was announced, Google’s shares rose, which in
some sense seemed to pay for the deal on its own."

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Loopy
This probably doesn't surprise anyone but their current business model is
terrible. Why would anyone click on a text based ad which distracts them from
the video they want to watch. I don't see why anyone would voluntarily do
that. At some point google is going to have to bite the bullet and have video
ads. Even if they are on after a video is shown they would be far more
effective and desirable for advertisers.

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jfoutz
Because, if youtube is ever profitable, they will be sued. over and over until
the end of time.

much better to just miss breaking even. Shovel all the user data into
doubleclick, and all the video data into crazy data mining algorithms.

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swolchok
On the surface, your argument has intuitive merit. However, you don't sue a
business unit (Youtube), you sue a company (Google). Google is profitable.

~~~
jfoutz
On the surface, your argument has intuitive merit. However, youtube isn't a
business unit. it's a subsidiary.

[http://googleblog.blogspot.com/2007/01/look-ahead-at-
google-...](http://googleblog.blogspot.com/2007/01/look-ahead-at-google-video-
and-youtube.html) <http://news.cnet.com/8301-10784_3-6153267-7.html>

edit: sorry, that was sorta snarky. and things may have changed since the
viacom lawsuit. (it was a subsidiary in late 2008)

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swolchok
Touche! Didn't do my homework on this one.

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radioactive21
it is not direct profits but it is indirect profits and strategic intentions
as the reason google bought it. google wants you to use its services, the more
you do the more you depend on them. video, voice, data, etc. they make profit
as a whole, so you cant look at one unit and say it doesnt bring in profit.
the longer you associate google with your video, voice and data needs they
win.

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tom_rath
Actually, the more you use Google's free services the more you cost them. It's
the non-techies who are clicking their ads which are making money for Google
so, for all their technical marvels, Google's revenue source(s) are pretty
narrowly defined.

I can almost picture Steve Ballmer slapping his cheeks with a mocking "Oh, no!
Google's dominating yet another money-sucking cost pit! Whatever shall we
do?!?!" before bursting out in laughter.

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moe
I think Ballmer stopped laughing at google sometime between them crawling out
of their garage 10 years ago and them approaching MSFTs market cap today.

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tom_rath
Until GOOG approaches MSFT's revenues, I don't think Microsoft will worry. If
there's a 'war' between those two companies, Microsoft is probably handling it
as one of attrition.

Google has one strong source of revenue (search advertising) and has been
thrashing about for years in an attempt to build at least a second source
without notable success.

Microsoft has many different sources of revenue and continues to build on
each. To take out Google, all they have to do is have Bing, Yahoo and the rest
patiently chip away at GOOG's search advertising dominance by a few percentage
points each year and that revenue will dry up. Then, without that revenue, all
of Google's vanity projects will collapse in a heap.

Google's many projects remind me of the Flying Lawnmower:
<http://www.youtube.com/watch?v=kNWfqVWC2KI>

You can make anything fly if you have a strong enough engine shoving it and
Google's engine is its search advertising revenue. Once that revenue decreases
enough, their lawnmower will fall to earth, and Microsoft is surely happy to
see them tack on new expensive doodads like YouTube and Chrome O/S to hurry
that day forward.

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philwelch
Somehow the anecdotes of Ballmer throwing chairs and threatening to "fucking
kill" Google run counter to your speculation. Either Microsoft is getting
worked up over a non-threat or Google is more dangerous than you think.

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ShabbyDoo
Google may be playing up the notion that YouTube is very unprofitable. Making
VCs think that online video is a bad business will help reduce new
competition. And, unlike eBay's Skype acquisition, there's probably little
shareholder pressure for Google to prove that it made a good choice.

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zandorg
My general calculation on YouTube is this:

-At Google Search, you do a search and get a text ad. Each text ad is about 400 bytes, each search page (with your results) is around 5k. Serving up the webpage is done from another site.

-At Google YouTube, you do a video search and get a text ad alongside it. Each text ad is 400 bytes, each search result you look at (eg, video) is about 2MB.

So, are you going to make as much, after paying for bandwidth, with a factor
of 400 (2,000,000 / 5000) difference in bandwidth?

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andres
It's been a while since I learned something _new_ from a nytimes tech article.

