How YouTube makes money

The company was bought by Google for $1.65 billion in 2006, at a time when it wasn’t making much of a profit.  Well, times have changed, and the ad revenue is in the black, this year.  Read more about it here.

My favorite example from the article: “When someone uploaded a recording of the Eminem song “Not Afraid,” for instance, instead of taking down the recording, YouTube ran pop-up ads that let people buy the song or the ring tone and shared the revenue with the copyright owner.”

The article compares the profitability of YouTube versus Hulu (which has content with higher production values) and mentions a future “Google TV.”

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2 Responses to “How YouTube makes money”

  1. I thought this article was interesting. First, because I had no clue how YouTube made it’s money, and second, because it raised some ethical issues when it comes to copyrighting.
    The number one issue I now have with YouTube because of this article is the fact that it almost encourages people to post videos without a copyright. Prime example being the Lion Gate clip. The fact that these companies aren’t demanding that YouTube take down the pirated videos, because they get more money with it being there, is alarming to me. I can see this eventually becoming a problem.

  2. When I saw this post I had a sense of deja vu, because I thought I’d read it before. I did a little search, and it turned out I had actually. This isn’t the first time that google execs have said youtube was “nearing profitibility”. According to All Things Digital, a Wallstreet Journal subsidiary, “That’s what CFO Patrick Pichette said in July 2009. And that’s what sales boss Nikesh Arora said in July of this year. And that’s what CEO Eric Schmidt said today”.

    Whenever Google talks about youtube, they never really mention what’s going on, except that it’s nearing the black. Youtube seems very similar to what we discussed about the .com bust back in the 90’s. Youtube was bought for 1.65 billion by Google, and years later they still don’t provide a source of income for Google. At first appearance it would seem that Youtube’s worth was seriously overvalued. But if anyone can make a profit it seems it would be Google. Youtube has definitely achieved a critical mass of users and the Ny Times article shows us that google has implemented the steps necessary to put together the money making machine, and must simply turn it on.

    All this makes me wonder what would have become of Youtube if Google hadn’t bought them up..

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