Peter Kafka

Recent Posts by Peter Kafka

Google Says YouTube Can Start Making Real Money, Very Soon. Really!

tradingplacesYouTube, the world’s biggest video site, is a money loser for Google. But it may not stay that way for long, the company hinted today.

In response to a question during Google’s quarterly earnings call today, chief financial officer Patrick Pichette contended that the company could begin making a substantial profit, someday soonish. Here’s my paraphrased note from the call (I should have a verbatim quote later on): “In the not too distant future, we see it being very profitable.”

If Google really does pull this off, it will be a remarkable turnaround project. Google shelled out $1.65 billion for YouTube in 2006, but since then, has struggled to get a handle on the site’s potential and pitfalls.

YouTube is exponentially bigger than any competitor, but has struggled to turn its enormous audience into dollars. And its costs are exponentially bigger than any other competitor, too: Each video in its catalog represents a liability¬†for the site, which has to host the clip and pay to stream it to users–and users are uploading something like 15 hours of video per minute to YouTube.

Google has never offered up any financial detail about YouTube’s performance, and didn’t during the call. Analysts have had good sport trying to figure out just how much revenue the site takes in and how much money it loses. One recent report concluded that the company was losing nearly half a billion dollars a year, while another pegged it at a more modest $174 million.

But the company has been fairly upfront about what it wants to do with YouTube: Get more professionally made videos, as opposed to stuff that users make themselves, on the site, and then sell as many ads as it can against them.

Google CEO Eric Schmidt did boast during the call that YouTube’s “monetized views” have tripled within the last year and that the company now sells ads against “billions” of video views every month. But this clip remains ad-free: