Is Google making money off YouTube?

I remember when they bought YouTube, everyone was saying there was no way to make it profitable with the huge bandwidth costs and nonstop lawsuits.

So, how 'bout it? Is Google turning a buck on the site?

And also, if I might hijack - how do they make money from YouTube? There are no ads on the YouTube site that I can see, other than the “featured videos” which I guess are paid for to appear prominently. But I don’t see how that can justify the billions Google spent on it. Where does the revenue come from?

I’ve heard some people talk about a reward scheme where video content producers get financial rewards for their content - based on ad click rates - which I guess must imply that there are ads presented alongside some of the video content. I can’t seem to find them though.

I recall hearing that YouTube is still money down the drain for Google. I’d assume that Google maintains it out of good-will and the desire to build a brand while it plays around with ways of making it profitable without killing the experience.

The reasoning being that if YouTube becomes a fact of life, it doesn’t matter if finding profitabilty takes a while. Once you get there, it will be huge.

And frankly, Google can afford to throw some money around.

They planned to place ads in the videos:

http://www.nytimes.com/2007/08/22/technology/22google.html
http://www.techcrunch.com/2007/05/11/youtube-video-advertising-no-pre-roll-no-context/

http://bits.blogs.nytimes.com/2008/02/13/youtubes-advertising-coming-out-party/

Apparently implementation was delayed: http://blog.wired.com/business/2008/10/youtube-launche.html
The anwser appears to be:

http://www.sltrib.com/ci_10830182