How much money is YouTube earning?

How much money is YouTube earning? How much money is YouTube losing?

Is YouTube a viable revenue generator?

This Stuff.co.nz article today got me thinking:

Technology consultants at RampRate Inc. project YouTube’s operating losses this year at US$174.2 (NZ$280) million – far below the $470.6 million estimated by Credit Suisse analysts Spencer Wang and Kenneth Sena in an April research report that became a hot topic on Wall Street and the internet.

The dueling forecasts are the latest twist in a guessing game that has intrigued investors since Google bought YouTube for $1.76 billion in late 2006.

Although YouTube has become an even more popular diversion since the Google deal, it still hasn’t proven it can make money.

The main problem with YouTube is:

1. It is a highly “intentional” website. The intention of most of the visitors are already firmly predetermined prior to them landing on the individual video pages.
2. It is a highly “focussed” content. The video playing on each page typically caught the attention of the viewers for the duration of their stay on that page. There are only two outcomes: if the video is captivating then they would mostly be impervious to distractions (ads, YouTube’s main lifeline), but if the video is not captivating then the viewers would just leave (leave YouTube, jump to other pages, look at related videos being suggested).

These factors present huge barrier to ad visibility (or should I say ad ‘distraction’), which leads to a point: is YouTube a viable vessel for ad delivery as it currently stands?

Ultimately, what better way to monetise YouTube?

Some scenarios:

• Google starts charging pennies for views: nothing can be worse than this and this would most certainly lead to the death of YouTube. There will be mass exodus of viewers and video uploaders, as well as resurgence of multimillion other sites offering free Tubes. Content would be scattered across the Internet and Google would loose one of its primary foothold. Some would definitely pay, but the sustainability of such practice is dubious at best and can be predicted to not last more than 2 years at worst.
• Google to provide premium content at price (a porn-site marketing paradigm): providing free low-quality content and high-quality content at subscription rate. This may take off as broadband connection speed improves over time and people’s appetite for non-blurry videos is ever present. High amount of quality control needs to be imposed to make sure there are low number of duplicate contents, Rickrolling, etc that may disappoint paying customers. But does Google really want to follow what porn sites do? Doubtful, unless they are desperate.
• Ad before content (a game-site marketing paradigm): playing short video ads before the actual desired videos are played. Surely this is a major annoyance to the viewers and I would only imagine Google doing this if YouTube gets into a really desperate state. There will no doubt be a mass exodus of viewers. Just to put things into perspective, if you are playing 50 videos (at 2 minutes average each) with each having 5-10 second ad lead, that’s 350 seconds of ads for 100 minutes of video, plus load time between the ad and video that may be inevitable = major disruption to services and a turn off for a lot of viewers.
• Increased on-page ad: this may be a viable option for Google. What about a banner ad above the comments space? What about one more banner ad on the top area? What about 2 simple text ads above the Related Videos? Doable. Not ideal, but so is losing YouTube.

Am I naive? Alarmist? Will YouTube never die?

Added 17/06/2009:

Another analysis from different angle by http://bbroveleit.wordpress.com/2009/06/16/is-youtubes-end-coming-soon/