Print 11 comment(s) - last by Jynx980.. on Jun 26 at 2:20 AM

While its competitors languish, Google continues to rake in the money thanks to its hale advertising endeavors.

Yahoo is facing reorganization of virtually its entire business, while Microsoft is seeking aimlessly about trying to develop a cohesive plan of attack to conquer the online world.  Meanwhile, Google is sitting back enjoying the view as it rakes in record profits.

Google's cornerstone is its advertising business.  For all the popularity of its search engine, maps, email, and documents services, it’s advertising that pays the bills.  Fortunately for Google, it has one amazingly strong cornerstone.

When Google first acquired YouTube for $1.65B USD, the key question was how to make it profitable.  Google executives still struggle with this challenge to some extent as the logistics are rather appalling -- 10 hours of content are uploaded for every hour in the real world.

However, according to analyst reports, Google has finally found a way to leverage YouTube's massive traffic to yield a massive profit -- video advertisingAccording to Citigroup Investment Research's Mark Mahaney between YouTube, Google Videos, Images, Maps, and Finance the site will make over $1B USD on display advertisements in 2009.

Mahaney goes on to boldly predict that Google will make $500M USD from video advertisements on YouTube alone.  He pegs Google Images, Maps, Video, and Finances will help contribute another $265M USD in revenue.  Finally, he believes that Google's acquisition, DoubleClick will bring in $280M USD more.

Citi has released broader estimates that by 2010, in the U.S. alone display ads will bring in revenues of $11.2B USD.  Surprisingly, the lucrative display advertising is one thing that Yahoo is currently doing well on.  It currently controls a leading 20 percent of the market, while Google only holds 5 percent.  However analysts predict that this balance will shift dramatically as Google ramps up its YouTube advertising efforts, with graphics heavy advertisements such overlays.

Using MySpace as a basis for his estimates, Mahaney analyzed the average CPM (cost per thousand impressions) and found it to be about $1.13 on MySpace.  Given the 483 billion page views this year, and projecting a growth of 50 percent for 2009, gives 725 billion page views, which when monetized would equate to $820M USD in gross revenue.

As growth isn't free, Mahaney applied a 40 percent traffic acquisition cost rate to the gross profit to come to the final figure.  Figures for the other Google sites were similarly reached.  The complete picture painted is of a much more financially sound Google in years to come.

With Google buying data centers for cloud computing and its SAAS (software as a service) at a frantic pace, Google already looks to be in good shape.  With the rosy outlook for Google's ad business, it appears, if the analysts' predictions hold true, that happy times are ahead for the Silicon Valley search giant.

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Does this mean..
By cruzer on 6/24/2008 1:55:47 PM , Rating: 2
.. that we may have to sit through an ad before each youtube video starts?

RE: Does this mean..
By amanojaku on 6/24/2008 2:00:46 PM , Rating: 2
<Sh1ting my pants>

RE: Does this mean..
By BladeVenom on 6/24/2008 2:07:58 PM , Rating: 2
I'm surprised it took this long.

RE: Does this mean..
By Motoman on 6/24/2008 3:58:33 PM , Rating: 3
This just in...

"Google predicted to really tick everyone off..."

RE: Does this mean..
By Nik00117 on 6/24/2008 10:28:48 PM , Rating: 2
You forget google has to make a profit its a business and it has to find a way to make $$$.

I suspect though if google is smart they will only display an ad every so many shows, and try to stay away from videos with sub 2,000 views or so.

But think about it, every hour on life you get 10 hours of video, in a day your talking 240 hours, that would last an average person easily 7-8 weeks. thats 4.8 to 4.2 hours of footage a day.

RE: Does this mean..
By Motoman on 6/25/2008 2:07:04 AM , Rating: 2
Didn't forget...just pointing out a fact. Pretty much anyone is annoyed by an ad - whether it's a commercial during Battlestar Galactica or something they have to watch before they can see the JooToob video they were looking for.

Just a simple statement that it's irritating.

RE: Does this mean..
By BruceLeet on 6/24/2008 3:58:52 PM , Rating: 2
As long as its not the PC/Mac ads Im cool with it

Does this seem odd to anyone else...
By DtTall on 6/24/2008 2:35:47 PM , Rating: 3
From "Video Advertising" link:
The goal, it states is to provide a "TV-like" experience

Why would you make this a goal? Isn't the ad-free content and the fact that it is user generated content the reason it got so big? If I want to watch crazy people doing silly things I can tune into JackA$$ on MTV (with ads) or if I want to watch cool experiments I watch Mythbusters (with ads).

Seems like this would open the doors to another site coming in and stealing its thunder. And don't say it can't happen. After all, it is the internet.

Slightly off topic...
By glitchc on 6/24/2008 5:46:14 PM , Rating: 2
Google executives still struggle with this challenge to some extent as the logistics are rather appalling -- 10 hours of content are uploaded for every hour in the real world.

Why not add an time limit to older videos after which they are deleted off the server? The video can be deleted after, say, 45 days, since the 10:1 ratio sounds like a real storage hog.

By Jynx980 on 6/26/2008 2:20:28 AM , Rating: 2
Does anyone here NOT block ads? It makes me cringe when I see other people browsing with a ton of ads all over.

Some things can't be blocked easily however and the Yahoo video ads are one of them. Just trying to look at a news video requires a 30 second ad from NetFlix. After 2 or so more videos you have to watch another ad. I stopped watching Yahoo videos a long time ago for this reason.

Now I get angry when this happens on news videos. What about if this happens on youtube where the majority of the content is total crap? I'm not going to sit through an ad to watch a kid light a can of wd40 on fire.

And what about the commercial tv programs that are on there? You'll see a lot more copyright/takedown requests if youtube is making money off other works with video ads inserted. Technically even the kid lighting a can of wd40 on fire would have rights to his own video.

I don't watch many youtube videos but if ads make it difficult and time consuming I will watch a hell of a lot less.

$500 M in Revenue
By osalcido on 6/24/2008 10:56:26 PM , Rating: 1
$500M in Revenue.... I'm not big city Economist, but isn't Revenue before expenses?

They spent $1.65Billion to buy Youtube.
Paid $1 Billion to settle the Youtube lawsuit.

And they're making $500 Million in revenues. Even if it were pure profit it'd still be pretty worrysome. I already see them fucking about with Youtube cramming more and more shit on to the page. How long before they screw it up enough to scare people off? What about the large investments needed to bring HD quality to Youtube, which they are in the process of doing.

How does the author come to the conclusion that the outlook for Google is rosy?

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