YouTube Money Worries

Views of Susan Boyle’s performance on the show “Britain’s Got Talent” topped 50,000,000 on YouTube this week (view video). The hype around her performance has been good for the show generally, other acts are heading for high millions in viewing numbers as well.

It sounds like Youtube is a fantastic success, a powerful new vehicle in popular culture, proof that social media works.

Except for one thing, it’s losing money, in the order of 470 Million in 2009. While revenue from advertising has grown, and is predicted to grow further, costs are still high and growing – with more than 50% of the cost base of YouTube being bandwidth. So it’s somewhat a victim of it’s own success.

Few videos get enough visitors to generate significant revenue – videos I’ve posted have rocketed up to a mere 300 views for example, and although there is some money from branded channels (costs reported to be around 30K) the business model is pretty weak on revenue generation.

So what could YouTube do? The most obvious is to charge subscription, but Wikinomics states that Google will avoid this if at all possible. And suggests that they will invent their way out of it – finding a solution to the bandwidth problem, or accept it as a loss leader (for now), or start working on other revenue streams – and point to a fee-based download option.

Also this week Yahoo announced the end of GeoCities, current sites will be continued but you can no longer sign up for a GeoCities site. Free blog services probably fill the same need that GeoCities once filled. I admit that my first thought on this news was “they still exist?”. It’s a measure of the pace of today’s world that something started 15 years ago already seems so quaint.

The current business model for many of the social media sites is user generated content (read free), viewers not paying and unwilling to pay, and the business struggling to find advertising to cover their operational costs let alone make a profit. Given that Twitter is also not making money, how long will it be before the current favoured business model falls over?

Image video via pixabay