Facebook generated $3 billion dollar profit from its 1.3 Billion Users
YouTube Generated ZERO Dollar profit from its 1 Billion Viewers
Revenue growing at Google video site, but still limited by narrow audience
Google Inc. nurtured YouTube into a cultural phenomenon, attracting more than one billion users each month. Still, YouTube hasn’t become a profitable business.
The online-video unit posted revenue of about $4 billion in 2014, up from $3 billion a year earlier, according to two people familiar with its financials, as advertiser-friendly moves enticed some big brands to spend more. But while YouTube accounted for about 6% of Google’s overall sales last year, it didn’t contribute to earnings. After paying for content, and the equipment to deliver speedy videos, YouTube’s bottom line is “roughly break-even,” according to a person with knowledge of the figure.
By comparison, Facebook Inc. generated more than $12 billion in revenue, and nearly $3 billion in profit, from its 1.3 billion users last year.
The results reflect YouTube’s struggles to expand its core audience beyond teens and tweens. Many YouTube users treat the site as a video repository to be accessed from links or embedded video players posted elsewhere, rather than visiting YouTube.com daily. Google executives want them to turn on YouTube the way they turn on television, as a habit, where they can expect to find different “channels” of entertainment.
That is a problem still facing veteran Google executive Susan Wojcicki as she begins her second year running YouTube, one that could be tougher to solve if declining profit margins for Google overall limit her ability to invest in new content and services.
New challengers also add urgency to her task. Facebook and Twitter Inc., which routinely send traffic to YouTube, are building their own video offerings. Facebook, and startups such as Vessel, are trying to poach YouTube stars. Meanwhile, Amazon.com Inc. and Netflix Inc. are changing the image of “online video” by licensing Hollywood-produced content and creating original programming.
“There’s a lot of junk” on YouTube, says Pivotal Research analyst Brian Weiser. “If they want meaningful TV budgets, they need to invest in TV content.”
Robert Kyncl, YouTube’s head of business and content operations, says online video is on the cusp of a growth spurt, much like cable television 30 years ago. He says it makes more sense for YouTube to invest in “Internet native creators,” rather than traditional TV shows.
Google bought YouTube in 2006 for $1.65 billion, but generated little revenue in the early years. Revenue accelerated in part due to skippable ads YouTube introduced in 2010. Viewers like them because they can skip ads they don’t want to watch; advertisers like them because they pay only when viewers do watch.
Sources: Wall Street Journal OxBridge Research, OTCKING, DailyStockDeals, OTCstockIQ
