I wonder what’s going to happen when energy costs go through the roof. You may not believe it but its coming. Soon! Real Soon!

I am on the board of a large video sharing company and I can assume the following with confidence: I would be VERY suprised if YouTube were spending more than 50 cents per thousand videos streamed on their run-of-the-mill short videos, and the cost is more probably 25-30 cents. On a global CDN their commit rates probably allow them to cover Asian traffic “for free” etc leading to averaging down the overall cost. Assuming they are streaming indeed $1bn videos per day their bandwidth costs should be somewhere between $90M and $180M — which fits the above estimate. Very back of the envelope. The Ramprate estimate looks flattering to me but the CSFB analysts were clearly looking to grab headlines. Hardware opex also looks insanely cheap: I think CSFB’s guess is much better here and indeed there has to be some DB and so on. Transcoding falls under hardware kit and is dirt cheap.

By contrast I would also be amazed if the company really cost $300M to run including content deals. If they have 300 folks, salary costs cannot be more than $45M which leaves a LOT of juice for content deals. On balance, $400M feels like a worst case estimate to run this business.

If they did make $200M last year, you can hardly see them doubling this in 2009 (these kinds of volumes NEED direct selling if you want a decent rate card, even for YT / G). So $300M topline ?

Probably still losing money but closing the gap fast.

Once they are breakeven, the world can then quietly assess the full extent of what just happened to broadcasting !

Also, while many want to debate YouTube’s bandwidth and hardware costs, what about their content licensing costs? Transcoding costs? Database costs? That’s something the Credit Suisse report included but I don’t know if this one does or not. There is more to YouTube costs than just bandwidth

Maybe Google can construct a balanced load by pairing YouTube traffic with web crawling. But they Google would still fail the second part of a peering agreement which is for the connected networks to increase each other’s connectivity.

There’s nothing in this for Level3 and AT&T so why would they do it? Instead they can charge Google for the bandwidth and collect a pile of money. There’s little Google can do but pay the bill.