Citi: YouTube Has Revenue Potential of $491M

Citigroup today points out that YouTube could easily get Eric Schmidt off its back by just slapping around some cheap banner ads. If YouTube were to sell banner ads on all of its pages, it could take in $491 million in net revenue in 2009, resulting in incremental net income of $156 million, according to Citigroup calculations released in an analyst note today.

Citi extrapolated using a MySpace CPM of $1.13, a projected YouTube page view increase of 50 percent, and knocking off a 40 percent traffic acquisition cost for revenue sharing.

Citi was surprised to find that of the top 100 most-viewed videos of the last month, only 28 showed advertising, and only one of those 28 was an overlay ad. That’s because YouTube is extremely selective about interfering with its users’ experience with advertising, and only shows ads on videos from its partners. Among other things, that keeps the site safe from ever advertising against unauthorized content.