YouTube Infrastructure Costs Vastly Overestimated: Report

9 Comments

[qi:_newteevee] YouTube is much closer to breaking even than widely thought, says a firm with intimate knowledge of global infrastructure costs. A widely publicized Credit Suisse report that said Google (s GOOG) would lose $470 million on the site this year neglected to account for factors such as peering traffic, wholesale bandwidth deals and cheap data center locations. Where the bank said YouTube’s costs will amount to $711 million in 2009, RampRate, a San Francisco-based company that advises large companies on IT infrastructure, says the actual cost is $415 million.

YouTube - RampRate vs Credit SuisseGiven Credit Suisse’s revenue estimate for YouTube, that would give the site an operating loss of $174 million this year. If you use other people’s revenue numbers — for instance, Jefferies said $500 million — the site would actually turn a profit.

9 Comments

les madras

either way, google’s acquistion of youtube really stalled online video monetization. they dont innovate but shove the same old overlays. and nobody else can, since there is very few players left.

prior to the acquisition fox had twice the market share as youtube. now it has a tenth. although the #2 player.

David Robins

The biggest difference between the two analysis is the bandwidth cost. Credit Suisse estimate is almost ten fold more than RampRate. The truth is somewhere in between. From my own experience at binfire.com, $48.7M annual cost for bandwidth for a site like youtube seems way too low!even if they use Google clout to negotiate for better terms.
BTW I love your blog!

David Robins

The biggest difference between the two analysis is the bandwidth cost. Credit Suisse estimate is almost ten fold more than RampRate. The truth is somewhere in between. From my own experience at binfire.com, $48.7M annual cost for bandwidth for a site like youtube seems way too low!even if they use Google clout to negotiate for better terms.

Maddy

If you use other people’s revenue numbers — for instance, Jefferies said $500 million — the site would actually turn a profit.

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