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Report: YouTube “Roughly Break Even” Even With A Billion Users
YouTube not living up to growth potential according to some analysts.
Is YouTube profitable or not? Is it Google’s still unrealized, brand-advertising revenue opportunity, or is it a troubled property that will never truly realize its potential?
Questions surrounding YouTube’s revenues and profitably have dogged the Google division almost since it was acquired in 2006. “When is YouTube going to make money?” has been the refrain from financial analysts for several years. And now, the Wall Street Journal (WSJ) reports that despite a billion users, the site is still not profitable:
The online-video unit posted revenue of about $4 billion in 2014, up from $3 billion a year earlier, according to two people familiar with its financials, as advertiser-friendly moves enticed some big brands to spend more. But while YouTube accounted for about 6% of Google’s overall sales last year, it didn’t contribute to earnings. After paying for content, and the equipment to deliver speedy videos, YouTube’s bottom line is “roughly break-even,” according to a person with knowledge of the figure.
Recently, YouTube reported strong time-spent and mobile growth from users. The site says that more than half of its traffic and views are now mobile, with corresponding growth in mobile revenues. This, despite intensifying video competition from Facebook.
According to the WSJ article, YouTube apparently suffers from insufficient destination traffic and a relatively “narrow” audience. While it has enormous traffic, the site apparently receives a substantial amount of its views from embedded videos on third-party sites.
According to Pivotal Research analyst Brian Weiser, as quoted in the WSJ, “9 percent of viewers account for 85 percent of online-video views.” That strikes me as inaccurately low, but I have no competing data.
YouTube has struggled to move beyond its origins as a site that was valued for quirky user-generated content (e.g., cat videos) to one that offers more and more professional or quasi-professional content in an effort to attract brand advertisers.
To that end, YouTube is making efforts to offer more polished programming and attract paid content subscribers. Notwithstanding some very successful “YouTube stars,” it has not yet been able to establish itself in the public mind as a source of high-quality video content in the way that Netflix, Hulu and even Amazon have.
Other than legal restrictions, it’s unclear to me why Google doesn’t enable access to its Google Play entertainment offerings though YouTube.
Under pressure from Wall Street and from rivals, YouTube is reportedly ready to roll out a new ad platform that would enable it to tap into Google search data for more intent-based display ad targeting. Undoubtedly, this move would generate better ad targeting and relevance, but it would also raise concerns in some quarters, especially Europe. Indeed, such a move would be precluded in Europe without explicit user-consent.
In one view of things, YouTube is a massive and successful video property for Google. However it still hasn’t lived up to Wall Street expectations about the amount of revenue it can or should be generating.