Around the Net

The More YouTube Boasts Of Its 1Bn Served, The More Of A 'Cash Sinkhole' It Seems

YouTube cofounder Chad Hurley wrote a blog post on Friday to celebrate the third anniversary of Google purchasing his company. That's all well and good, but some bloggers suggest that Hurley might consider keeping a lower profile seeing as how Google just admitted overpaying for the video sharing site, which is still failing to generate revenue proportionate to its user-base.

Calling Hurley's post "rather self-congratulatory," NewTeeVee.com notes that some principles co-founder reiterates "have nothing to do with premium content, and indeed that's where YouTube's biggest problems have arisen: the Viacom lawsuit, the music label fights, the slow trickle of big content deals."

Hurley's post, which also mentions that YouTube is now serving over 1 billion videos a day, "seems to fit a pattern," according to The Times' Bits blog. "For the last several months, Google, which typically says very little of substance about the numbers underlying its business, appears to have been trying to dispel the idea put forward by Wall Street analysts and some tech pundits that YouTube is a cash sinkhole ... The post appeared intended, in part, to rebut a much-quoted report by Spencer Wang, a Credit Suisse analyst, who predicted that YouTube would lose $470 million in 2009."

Writes Podcasting News, "While YouTube has obviously nailed the user experience that people are looking for with Internet video, they have yet to resolve the legal and financial challenges that the site faces."

Google head Eric Schmidt himself is now admitting he overpaid for YouTube by about $1 billion. Under oath during his testimony before Viacom lawyers, Schmidt estimated the video sharing site was actually worth about $600-$700 million when Google agreed to pay $1.65 billion for it in 2006.

Mashable points out that, "YouTube still may not be making enough money to justify the 1.65 billion dollars Google has paid for it, but it definitely makes it up when it comes to visitors."

Read the whole story at Mashable et al. »

1 comment about "The More YouTube Boasts Of Its 1Bn Served, The More Of A 'Cash Sinkhole' It Seems".
Check to receive email when comments are posted.
  1. Jonathan Mirow from BroadbandVideo, Inc., October 9, 2009 at 6:08 p.m.

    Of course YouTube is a cash suck - you can't give away something that costs money (bandwidth) forever and make it up in volume ("we cheat the other guy and pass the savings on to you") - the issue REALLY is that they have created an environment where peope think there is NO cost associated with delivering video on the web when nothing could be farther from the truth. The only reason they can sustain this vampiric bandwidth cow is that they are Google, which (for some reason) doesn't have to play by the same rules as the rest of the world. Must be something about being cash positive in a cash negative world...

Next story loading loading..