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Internet YouTube Profit is Google's Top Priority
Shane McGlaun (Blog) - May 1, 2008 3:27 PM

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14 comment(s) - last by StevoLincolnit.. on May 2 at 10:27 AM

Announcement sends Google stock price up over 4%

Google CEO Eric Schmidt told Reuters that Google’s top priority this year was to make a profit from YouTube. Schmidt made the statement in an interview recorded for CNBC according to Reuters.

The interview and statement of YouTube being a top money making priority was reportedly enough to send Google’s stock price up 4.7%. Reuters quotes Schmidt from the CNBC interview transcripts saying, “I don't think we've quite figured out the perfect solution of how to make money, and we're working on that. That's our highest priority this year.”

Google has yet to work out how exactly to maximize the huge amount of traffic that YouTube generates and turn that traffic into money. Google purchased YouTube in 2006 for $1.65 billion, by far the largest purchase in Google’s history.

Shortly after the purchase YouTube and Google were sued by Viacom over the posting of videos that violated Viacom trademarks for $1 billion. While Schmidt didn’t get into details about how Google expects to make money off YouTube, he did say that the money making ideas will involve ads other than the currently used in-line text ads that run beneath the videos.

Schmidt also says that Yahoo and Google are considering a deal that would have Google ads replacing some of Yahoo’s own ads that run alongside Yahoo search results. The move from its own ads to Google ads is an attempt to allow Yahoo to focus on other advertising fields.

Schmidt said, “We did this as part of a commercial conversation, which I obviously cannot go into, but it's one of the strategic options that we believe Yahoo is considering at this time.”

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I think rentals.

By daftrok on 5/1/2008 4:05:18 PM , Rating: 5

You watch the first 5 minutes of a show for free on YouTube, then a link showing this:

Watch full episode once ($0.10)
Buy full episode ($1.00)

The shows can be in 480p with 2.1 stereo, regardless of which you choose. For rentals its embedded into the site and for buying you can download either .wmv or .mov versions of the show. BRILLIANT!

RE: I think rentals.

By InternetGeek on 5/1/2008 4:32:03 PM , Rating: 2

That plan sounds interesting. They could even try a subscription service. The main problem is that content wasn't always produced in a high resolution/HD/etc. There wouldn't be much difference between a free subscription and a paying one.

I like the idea of Internet TV, but I think that people would stop using YouTube at the first mention of "Pay For this video". Not many would actually read the second line "It's not mandatory!".

Anyone knows if there's a mobile youtube? That might be a start. Agree with Telcos on providing content from YouTube into a cell phone and share the profits. Everyone is jumping into that these days.

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RE: I think rentals.

By nitrous9200 on 5/1/2008 5:30:53 PM , Rating: 2

There is a mobile YouTube, at http://m.youtube.com
I use it quite a bit on my phone, and it's a fun thing to have.

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RE: I think rentals.

By StevoLincolnite on 5/2/2008 10:27:55 AM , Rating: 4

I also watch Free Internet TV through Winamps Shoutcast TV.

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RE: I think rentals.

By daftrok on 5/2/2008 12:40:12 AM , Rating: 3

All the site would say is: "Now watch full TV shows on YouTube!" They don't have to indicate you have to pay until you click. I mean, you see a five minute preview then at the end show this:

1) Watch full episode once in DVD resolution (480p) with stereo sound (2.1) for only $0.10.

2) (Only show this if available) Watch episode once in HD resolution (720p) with surround sound (5.1) for only $0.15.

3) Download episode for yours to keep in DVD resolution (480p) with stereo sound (2.1) in Windows Media (.wmv) or Quicktime (.mov) format for only $1.00.

4) (Only show this if available) Download episode for yours to keep in HD resolution (720p) with surround sound (5.1) in Windows Media (.wmv) or Quicktime (.mov) format for only $1.50.

If YouTube does this, they can make a WHOLE lot more money and can cut down on the ad usage, keeping customers happy. BRILLIANT!

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RE: I think rentals.

By FITCamaro on 5/2/2008 6:10:40 AM , Rating: 3

The bigger problem is getting studios to let them sell TV episodes that cheap. It's unlikely given the current cost of TV shows on iTunes, Xbox Live, and other download sites.

And while $1.00 an episode doesn't sound like much, most series are about $25-30 a season. For a normal 24 episode season, I'd rather pay $1-6 more and have the discs to rip the show to my computer.

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Why did the stock go up?

By eman7613 on 5/1/2008 4:31:18 PM , Rating: 2

Isnt what google just announced that they have made almost nothing back on their purchase of youtube? All this means is google still dose not know how they are going to make money with their 1.65 billion dollar investment in traffic. If they place adds people will move to another site without them, if they set rentals people will go to somewhere else were it is free. Youtube seems to be just a realy, realy bad investment.

RE: Why did the stock go up?

By SlipDizzy on 5/1/2008 5:34:54 PM , Rating: 2

I disagree. I don't think people will move on if they place ads on their site. Depending on the placement, a small percent of people may leave but the majority will take it and move on. Look at how many ads myspace.com has up now. If you go to myspace you are immediately punched in the face with adds and kicked in the balls with music. But for some reason, people continue to migrate to myspace and don't seem to mind the ads.

With proper placement of ads and rentals, I'm sure youtube will retain enough people to turn a huge profit.

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RE: Why did the stock go up?

By SlipDizzy on 5/1/2008 5:38:20 PM , Rating: 3

quote:
Depending on the placement, a small percent of people may leave but the majority will take it and move on.

Fixed:
Depending on the placement, a small percent of people may leave but the majority will accept it and continue to use YouTube.

Please excuse my grammar. I apologize.

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RE: Why did the stock go up?

By eman7613 on 5/1/2008 11:12:22 PM , Rating: 2

There are still a lot of people at myspaces yes, but huge numbers of them have moved on to facebook, which dose not have all those things coming out the wazoo. I know a lot of kids at school, who say they only go onto myspace b/c they have a friend who dose not have a facebook yet or some such thing. However many videos, especially the popular ones, are hosted all over many sites, so there would be nothing holding people back from migrating away. Also, don't worry about the grammar :P

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Here it comes

By v1001 on 5/1/2008 4:09:23 PM , Rating: 2

Get ready to be blasted with advertisements.

I know they have to make money and we knew this was coming. But it's got to cost a lot of bandwidth and server space. Like any other good thing the ads will end up being so annoying and invasive some day that you just give up going to the site at some point. Then they get super greedy and it gets way worse, then they get bad management or totally sell out and the site goes to crap. Then a brand new fresh successor every one runs too. Ah the circle of (internet) life. Well we'll just enjoy the ride for now while it's still good and while it lasts though :)

RE: Here it comes

By Oregonian2 on 5/1/2008 6:56:45 PM , Rating: 2

That new one would either have the same ads to make a profit or somehow have lower operating costs (how?). Why would an alternate start up, or would investors like to spend and lose the same money over and over again for the same approach to the same losing prospect?

Google's objective this year wasn't (as I read it) to make a positive ROI, but just to stop losing additional money on it. To profit at all, any. Even a positive cash flow would be good (one can have positive cash flow and still be losing money).

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Wait

By TerranMagistrate on 5/1/2008 4:26:03 PM , Rating: 2

quote:
Google purchased YouTube in 2006 for $1.65 billion, by far the largest purchase in Google’s history.

IIRC, didn't Google purchase DoubleClick for $3.1 billion?

Also, it's a bit surprising that Google isn't generating massive amounts of profit already from one of the most visited places on the internet which Google owns wholly.