“YouTube's recent decision to court producers of professional longform content, including movie studios and TV networks, may be driven at least in part by the fact that the short videos that presently dominate the site not only don't cover its expenses but actually contribute to its losses as more and more of them are posted. A new study concludes that YouTube spends $2.64 million a day -- or $753 million a year -- in order to serve its 75 billion video streams to 375 million unique visitors annually. The study, by Internet Evolution, which cited cost estimates from Bear Stearns, comScore, Credit Suisse, and YouTube owner Google, observed that YouTube's annual revenue was estimated to be $90 million by Bear Stearns and $240 million by Credit Suisse. "Depending on whose version of revenues you accept, Google is losing anywhere from $513 million to $663 million annually on YouTube," Internet Evolution's David Silversmith wrote. Put another way, he noted, Google loses more than a dollar a year for each YouTube visitor.”
It endlessly fascinates me when the final acknowledgement that free things don't make anyone any money is announced. I picture a room full of hipster web media experts, all high-fiving each other in celebration of their billionth site visit when a lone accounting dude pouring over the annual report appendices raises his hand as says …..Ahhhh, fellas..... We, ahhh... don't actually make any money.
What?!?.... What do you mean? We've had a BILLION visitors last year! Our stock has tripled in less than 2 years. What the hell are you talking about?
Yes... but it ahhhh, says here that...we ummm, well, lost $600M in the last quarter. Our... product doesn't generate any...like... money....ummmm “revenue” I think they call it.
Two guys in the middle of an impromptu Segway polo match swerve and crash into each other. Another skitters out of control and flies through a plate glass window and ends up draped across a $3500 bonsai shrub outside.
The room is now eerily quiet. Nervous glances are exchanged. The last Segway wheel slows and finally stops turning. From the back of the party room a little voice squeaks out “Will that effect our bonuses this year?”
So once again, another viral web application concedes that the only business model that really works on the Internet is pay-per-view porn. I mean, Good Lord, how many more “Aha” moments will it take to cement the concept that a broke, 17-year-old with the mind of pea surfing the web for the next bit of free content isn't a sustainable business demographic. What is it about this kid that makes him everyone's customer bullseye?
It doesn't take a business genius to figure this stuff out. A business built on nothing, generates nothing. If it doesn't make financial sense at some basic level, it will not succeed. It's just a matter of time. We keep buying into this bullshit Web 2.0 philosophy only to discover that sooner or later the fact that no one pays for anything makes every single one of these powerhouse apps fundamentally unsound and illogical from a business perspective.
Wow....what a surprise! Let's all Twitter one another about this shocker. Who knew?