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Google purchased YouTube for more than $1 billion, but can't make a profit on the popular video sharing site

After purchasing YouTube for a hefty $1.65 billion three years ago, Google is still trying to find ways to turn the world's No. 1 video sharing site into a profitable business.

"In the not-too-long distant future, we actually see a very profitable and good business," Google CFO Patrick Pichette said during a conference call.  "We are really pleased with the trajectory."

Google has been working more closely with Hollywood, agreeing to licensing deals with Time Warner and Walt Disney.  These partnerships will help bring additional professional content to YouTube, which is seen as a necessary step to help attract new advertisers.

Financial analysts are now predicting YouTube will lose between $70M and $500M throughout 2009, so Google's latest attempts to turn the site into a profitable business must succeed.  Despite paying such a heavy price tag in 2006 -- and continually losing money -- YouTube's large viewership could open the door for Google to one day make big bucks, once officials figure out how to woo new advertisers to the site.

YouTube is now attempting to generate revenue throughout the site, though site designers hope to avoid intrusive ads that will drive users away from the site.  YouTube uses banner ads on the front page, text ads that run before, during and after videos, and select videos, such as movie trailers or interviews, are located in a specific area.

"These are not signs of what I call a smart acquisition, these are signs of a dumb acquisition," Global Equities Research analyst Chip Chowdhry told the San Francisco Chronicle.

Google, as it continues to carefully try and woo new advertisers, said the company had "yet to realize significant revenue benefits from our acquisition of YouTube," and that trend is expected to continue through the rest of 2009.  Even if the company is able to begin turning a profit on YouTube, some analysts believe it still won't be enough; for example, Bernstein Research said the ad revenue wouldn't even cover bandwidth and data storage.





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