<i>He cited research from Credit Suisse</i><p>Seriously? People are <i>still</i> citing that hack-job of an analysis? It didn't even take peering into account - it was ridiculous.
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<p>it is just part of a bigger strategy - text search, book search, audio/video search etc.<p>youtube is a long term investment. as long as G has money to keep it running/improving, they have nothing to worry about.<p>may be 5-10 years from now, the same ppl would say that the best investment that google made, is youtube.
Important point about the cost of the original acquisition:<p>"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."
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.
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.
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.
My general calculation on YouTube is this:<p>-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.<p>-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.<p>So, are you going to make as much, after paying for bandwidth, with a factor of 400 (2,000,000 / 5000) difference in bandwidth?