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Google: YouTube Will Soon Be “Very Profitable”

YouTube (s GOOG) will be “very profitable” in the “not too distant future,” Google CFO Patrick Pichette said on the company’s quarterly earnings call today. The site’s monetized views have “more than tripled in the past year,” according to Jonathan Rosenberg, SVP of product management. “We’re now monetizing billions of views of partner videos every month.”

Google CEO Eric Schmidt, who’d previously given YouTube a few public spankings about pulling its weight in revenue, said today he was “very pleased” with the site’s money-making trajectory.

Brand display advertising is doing well on YouTube, noted Schmidt and Nikesh Arora, who is president of global sales operations and business development. And the majority of YouTube views are not professional content, Schmidt added. Google execs called out featured videos on search, the YouTube home page masthead, pre-rolls and long-form content as areas for revenue growth.

YouTube’s bottom line gets a lot of ink, considering there is virtually no confirmed information about the site’s expenses and revenue. Credit Suisse had made a splash in April by estimating that YouTube could lose $470 million this year, however an infrastructure research firm disputed that report, saying the bank had underestimated Google’s ability to minimize costs.

As for the percentage of video views that YouTube monetizes, Rosenberg gave Google’s first real comment on the matter — if only on a relative basis. A YouTube exec had previously said that the assertion that YouTube only monetizes 3-4 percent of views is “grossly inaccurate.” The company gave the slimmest of indications that the portion was at least 9 percent of views, and perhaps higher. In those single digits, tripling might not be as huge of a jump as it seems.

As for pre-rolls, embracing them shows a change on YouTube’s part to reflect the reality of serving video. The site had scorned the format early on for being unfriendly to users. In August 2007, a YouTube product manager told us, “Pre-rolls and post-rolls did not perform well on our platform. [In our testing,] 75 percent of our users were unhappy with them.” Today, Arora said on the call that YouTube users now accept that pre-rolls are a necessary corollary to premium content. Rosenberg noted the site sees “very little drop-off” when it shows pre-rolls.

Correction: The initial version of this story misattributed Patrick Pichette’s quote from the earning call about YouTube profitability to Nikesh Arora.

With reporting by Jordan Golson.

18 Responses to “Google: YouTube Will Soon Be “Very Profitable””

  1. Once Youtube monetizes all the videos that need to be monetized, it’ll be over 10 Billion views monetized per month.

    At $10 CPM, that means $100 Million extra in revenues per month. $10 CPM average is a VERY low estimate. Google can very likely achieve $20 or $30 CPM on high quality videos. And more high quality videos WILL be uploaded and created once more creators are able to monetize their Youtube videos.

    And don’t tell me user generated content cannot be monetized. That is just BS. UGC generated less CPM than PRO content, of course, but you cannot say they generate nothing.

    That would be like saying Adsense for websites doesn’t work for small websites. No it works on all websites. It works just better for websites where visitors tend to buy more stuff and click on more ads. You have ABSOLUTELY NO way to say for sure that the viewer of a User Generated Video has less money to spend on advertisers. In fact, I am pretty sure that people watching UGC on Youtube probably has more money to spend than certain people watching certain brainless Hollywood films.

  2. One obvious way Youtube will monetize more videos, is once they stop their ridiculous restrictions on monetizing Youtube videos:

    1. Only citizens of USA, UK, Spain, Japan, Ireland, Germany, France, Canada, Brazil, Australia can yet even APPLY to become Youtube partner, which basically means to be allowed to display advertising on the videos to monetize them.

    2. Why is Google at all having that partner program!! How can Google allow any webmaster monetize a blog with Adsense, and then have to somehow only allow people monetize youtube if they apply to become partners?

    Don’t tell me video copyrights are more serious than any other Adsense website’s copyrights. You can pirate video on Adsense websites just as well. Google has advanced digital and analog fingerprint detection technology for Youtube videos, so they can simply scan uploaded videos through that system before allowing any specific video to be monetized. And just as for Adsense, any copyright abuse would immediately be undone, user can be banned, and all responsability is then put on the user who illegally tried to profit on copyright infringed contents. Also Google has very solid usage data over many years of usage on Youtube and other Google sites, so it makes no sense that Google would not be able to allow a large part of verified real users and no reason Google cannot ask, just as for Adsense, that new users need to verify their bank account, verify a credit card, verify a home address and more types of verifications, perhaps even charge a fee to get verified through signed contract that has to be mailed in, scanned passport/ID, SMS verification, whatever. Google should have plenty enough of ways to make sure 100x more videos can be monetized.

  3. timekeeper

    Liz – good article. It’s amazing at how obtuse Google execs are when they are talking about YouTube revenue. They are a public company, I’m not sure why no one has held their feet to the flames and asked for a real number. My position: If it was a good number, they’d say it. They are hiding YouTubes expenses in Google’s vast profits.

    Bob – good plug for BBQ Pit Boys – would you be willing to share what those rev numbers are?