Why is the Incredibly Popular YouTube Failing to Turn a Profit?
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Why is the Incredibly Popular YouTube Failing to Turn a Profit?

YouTube is the third most visited website in the world, and by far the most dominant video platform on the internet. It has been around for over five years, and many could not imagine their life without it. So despite having a noticeable advertisement coverage, how is YouTube making a loss year after year?

YouTube is the third most visited website in the world, and by far the most dominant video platform on the internet.  It has been around for over five years, and many could not imagine their life without it.  So despite having a noticeable advertisement coverage, how is YouTube making a loss year after year?

It seems that all YouTube videos have ads both within the video and in the space around the video.  However only 30% of YouTube videos contain any form of advertising.  This is because many YouTube videos aren't about good advertising topics.  For example, a video tutorial about a game wouldn't attract much advertising, as the only possible ads would be advertising the game.  However if a person is watching a tutorial of a game, it is very likely that they already own the game.  In addition to tutorials, YouTube contains a lot of alternative and offbeat videos that are not suitable for ads.

If YouTube was not owned by a wealthy company it would not exist today.  Luckily YouTube is owned by a multi-billion dollar company Google.  Google is willing to fork out hundreds of millions of dollars each year to keep YouTube running, hoping that eventually it will start turning a profit.  Unfortunately there is no guarantee it will, because as the site gets bigger and makes more money, the cost of running it will also increase.

So why is YouTube so expensive to run?  YouTube consumes much more bandwidth than most other websites due to the fact that all of the content is videos.  Videos take up an enormous amount of bandwidth, and there are a lot of them. In addition, all of the videos have to be kept somewhere. Even the ones that were uploaded years ago and have gotten no views. And then there is partner revenue sharing, staff wages and other costs that come with running a company.

Google has been paying for YouTube for over five years now, and has not seen any return in the investment. Recently YouTube has been trying to get into the commercial content area (movies and TV shows), so that it can attract high paying advertisers. These new ventures must be successful if YouTube is to survive. It is likely that Google’s shareholders have been putting pressure on Google to squeeze some money out of YouTube, which explains the company exploring into new areas. However if not successful, sooner or later Google will be forced to give up YouTube. And who will buy a company that has been losing hundreds of millions of dollars annually for its entire life?

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Comments (2)

That's interesting, I'm surprised as I imagined YouTube made money

me too, I imagine that with all the adds and users it's making good money.

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