RampRate lowered the estimated bandwidth costs, stating that by locating its data centers in “out of the way” locations like Iowa and Finland, the company saves significantly on the cost of transmitting data. RampRate also took into account peering costs for what they say is a more accurate estimate.
While a $174M loss is still a significant loss, it’s not the sob story we’re used to seeing with YouTube and its tireless search for profitability. RampRate takes a cynical line on Google’s motivations for not correcting reports like Credit Suisse’s:
Google is no doubt thrilled to let YouTube be known as a financial folly. In the dangerous waters of online content, a whiff of potential profit is an irresistible lure for predators such as copyright lawyers circling user generated content monetization and content partners that are all too ready to turn on their distributors in a feeding frenzy.
They also take Google to task for shielding their relative profitability from their contributors, who might (well, probably not, but you know) be able to claim a share of that money:
The key is its lack of leverage with premium content partners, and the thousands of copyright holders whose content is posted by users onto YouTube without the owner’s permission. Any appearance of profits leads to more draconian revenue share demands from partners and additional lawsuits from owners of unlicensed content. An apparent loss deters this behavior, making it eminently advisable for Google to let the rumors of YouTube’s losses grow and compound. This perception of a loss-making business is one of the factors that contributed to ASCAP collecting only $1.6M instead of $12M from YouTube in a recent court judgment.
Ouch. What do you think: is Google hiding YouTube profits (or at least its less-impressive losses) or is YouTube a serious drain on Google’s resources?