Earlier this year, there was an analyst report that got a lot of attention, claiming that YouTube's bandwidth bills were huge, and there was no way the site was likely to ever become profitable. Google critics gleefully danced on Google's grave, mocking the company for the purchase. However, the estimates by the analyst seemed off, and we began to wonder if the ancillary benefits of YouTube actually made the site a much better investment
. In fact, Google later hinted
at exactly that point. One of the major problems with the original estimates of YouTube's bandwidth costs were that they simply extrapolated out the cost of bandwidth, and never took into account Google's unique position -- such as the fact that, during the "down" years a while back, Google scooped up a ton of dark fiber
for pennies on the dollar.
Now, a new analyst report points out that, given how much traffic runs through Google, combined with all that dark fiber it owns, there's a good chance that Google has set up peering relationships with other backbone providers, such that YouTube's actual bandwidth bill may be closer to zero
. I'm not sure I believe that either, but at the very least, it points out that there's a lot more to consider here than simply extrapolating out the number of videos times the basic cost of bandwidth.