The Secret 'Profits' Of YouTube
from the don't-worry,-be-happy dept
That said, really the only truly worthwhile parts of the article are the ones where analyst Keith McMahon speaks up. He seems to be one of the few folks out there who actually has bothered to look at YouTube within the larger context of Google itself, and makes a few important points about (a) why YouTube helps Google in many other ways and (b) Google benefits from the widespread belief that YouTube is losing tons of money:
"There are many urban myths surrounding the way that companies extract value from the internet," he says. "Google's spin-off benefits from owning YouTube include the accumulation of our data and strengthening of their network design -- and the more time people spend watching online video, the more advertisers will pour into marketing on the internet as a whole. There's no doubt that Google can afford YouTube."This leaves out another point as well: the more that people believe YouTube is unprofitable, the less likely they are to build serious competitors. I have no idea whether or not YouTube is actually profitable directly yet (I'd doubt it), but I think those who are insisting that the acquisition by Google was a bad idea, or that YouTube is somehow on its deathbed, haven't taken much time to understand some basic trendlines or the larger picture of how Google views YouTube, and the opportunities it has to make money via YouTube down the road.
McMahon also believes that by keeping quiet about YouTube's hidden benefits and by allowing the misconception of it as a deeply unprofitable business to circulate, things work very nicely in Google's favour when it comes to negotiating with copyright holders in the world of TV, movies and music. Copyright holders can't demand money that isn't there, and it would certainly take no more than a hint of profitability at YouTube for lawyers to descend, threatening court cases and demanding higher royalties. In the new, topsy-turvy world of online economics, it seems astonishing that losses on paper have actually made YouTube a more powerful online force.