YouTube set to lose $470 million this year

YouTube focusing heavily on advertising to curb losses
YouTube focusing heavily on advertising to curb losses

YouTube is the most popular video-upload site on the planet, but its popularity looks likely to have some monetary repercussions in 2009.

A report by Credit Suisse has found that the website is haemorrhaging money, due to high bandwidth costs and a lack of key advertising.

According to the report, Google, the owners of YouTube, will have spent around $711 million (£476 million) on bandwidth, licensing content, sharing its ad-revenue, storage, sales and marketing by the end of the year.

Total revenue for the company looks set to be $240 million (£160 million). Although this is a 20 per cent increase year on year, it does leave a whopping deficit of around $470 million (£350 million).

Advertising problems

"In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetised (likely through more deals with content companies) and to drive more advertiser demand through standardisation of ad formats and improved ad effectiveness," Credit Suisse analysts Spencer Wang and Kenneth Sena wrote in their report.

The problem with this is finding advertising which is acceptable to users of the site. Unfortunately, it looks like YouTube has already sparked a minor revolt in its recent advertising methods.

Balancing act

The website Mashable is reporting that the site is trialling pre-roll adverts. On recent CBS clips, 30 seconds of advertising is preceding clips which are just two minutes long.

Users are campaigning against this on the site's comments and by lowering the rating of content which features pre-rolls. Mashable has also noted that YouTube is using bigger banner ads.

Getting the balance right between advertising and content is a huge one on any website.

While this was not an issue when YouTube first began just three years ago, now it has gone legit, stripping itself of any unauthorised content, Google needs to make sure more than ever that both its sponsors and users are happy.

Especially with the likes of Hulu nipping at its toes.


Marc Chacksfield

Marc Chacksfield is the Editor In Chief, at DC Thomson. He started out life as a movie writer for numerous (now defunct) magazines and soon found himself online - editing a gaggle of gadget sites, including TechRadar, Digital Camera World and Tom's Guide UK. At Shortlist you'll find him mostly writing about movies and tech, so no change there then.