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YouTube: Not So Stupid?



This year, we’ve seen a lot of pessimistic estimates of YouTube’s operating losses. While the site does bring in some advertising revenue, they haven’t quite covered that $1.65B price tag yet. And based on bandwidth costs, various analysts have estimated annual operating losses of anywhere from $470M to $175M.

Note that the more conservative estimate here still includes a bandwidth bill of nearly $50M. But new reports are estimating that cost as even lower. After Arbor Networks’ recent analysis of 256 exabytes of Internet traffic, it seems YouTube may be paying nothing for their bandwidth.

As we mentioned before, Arbor Networks found that 6% of all Internet traffic worldwide was going to Google. With that much traffic (we’re talking almost 17 quadrillion megabytes), it seems Google would have to have some serious pipage to support their popularity.

According to Wired,

The cost of bandwidth has fallen and so too have the profit margins for moving bits, even as traffic grows at an estimated 40 percent a year.

With the growth of Google’s network and Content Delivery Networks, the economics of who pays whom to connect grows more complicated than the early days of the net when money flowed upwards — little ISPs paid regional ISPs who paid major ISPs who paid backbone operators.

Now if you are Google, you might even begin asking Comcast to pay up to connect its Google Tubes straight to their local cable ISP networks. That way, YouTube videos and Google search results would show up faster, letting the ISP brag that YouTube doesn’t stutter on their network, a potential commercial advantage over its DSL competitors.

Unfortunately, Wired says, the true nature of the Internet infrastructure is guarded by NDAs, so we may never know who owns the pipeline.

What do you think? Is YouTube operating for pennies because Google owns so much pipe?

  • http://electronicsresources.blogspot.com/ electro

    What. You Tube costs millions? I think You Tube is popular.

  • http://aqunayo.info/ Aqunayo

    easy – I hope you tobe still exsist, because you to are still needed in the online world

  • http://www.missionimblogable.co.uk Jon Paget

    Even accounting for the variation in bandwidth costs, the variance in YouTube’s estimated costs are staggering. Surely the question is how long Google will continue to fund the world’s most visited site?

    I was at Google’s London HQ this summer and it’s clear this issue is a major source of frustration. Obviously I hope they find a solution – as long as it’s not to the detriment of the user and their interaction with the site. Is that actually possible? I’m not sure.

    Good luck Google.
    .-= Jon Paget´s last blog ..Twitter Lists; will your business benefit? =-.

  • http://www.seo-theory.com/ Michael Martinez

    This is one of several reasons why Google wants Net Favoritism, which they have dressed up as Net Neutrality. They want telecom customers to pay their bandwidth bills.
    .-= Michael Martinez´s last blog ..Another 20 Hard Core SEO Tips =-.

  • http://www.gadgets4nowt.co.uk PS3

    17 quadrillion megabytes! Wowzers, and only a few years ago we were all on dial-up!