Everyone knows that YouTube is losing money but according to the technology consultant firm RampRate, the Google owned site is losing far less than what is commonly believed.
In a report released today entitled “YouTube: Google’s Phantom Loss Leader” Tony Greenberg, founder of RampRate has a lot to say on the subject.
He reckons that YouTube will only lose around $174 million and not $470 million that the investment bank Credit Suisse predicted in April.
According to the report, one of the reasons that Credit Suisse came up with such a large predicted loss is that they overestimated the costs of YouTube’s bandwidth and didn’t take into account other cost efficiencies that YouTube had in place such as peering agreements instead of paying for bandwidth etc.
Greenberg says “I want to take the arrow out of the back of YouTube, which is being ostracized for losing money on video when they damn well have a pretty good reason for doing that”.
“We’ve researched and launched video monetization strategies that are profitable at a much smaller scale” he adds.
“Google is building a Trojan horse business model that protects their long term interests against telecom, cable operators and content owners that is a good as anything I’ve ever seen” he said.
So why is Google happy to let people believe that YouTube is losing a lot of money?
Greenberg says one reason is that it puts copyright lawyers off who might otherwise want to grab a share of YouTube’s profits, which of course does make a lot of sense.
Another is that Google can negotiate more favourable deals if the perception is that YouTube is losing a lot of cash.
Of course it also inhibits competition and allows YouTube to retain a dominant place in the market.
“Google is no doubt thrilled to let YouTube be known as financial folly” says Greenberg.
YouTube is immensely popular with over a billion videos being viewed on a daily basis. Greenberg reckons that once Google has all its deals in place Google will eventually reveal just how much revenue potential YouTube actually has.
According to Greenberg, “YouTube is the most powerful broadcasting platform in history”.
Google isn’t saying much on the subject but Credit Suisse say they stand by their original assessment.
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