OK, I give up. How does YouTube make money?

I watch YouTube videos all the time, mainly Mylène Farmer clips and have yet to see an advert.

Check out the “Powered by Google” right next to the search button. Thats advertising (though I suppose its possible Google isn’t paying them to put that on each of their pages). Also, if you actually do a search there is an add for University of Phoenix on the right side of the page.


As Google owns it I count that as a logo and it would never occur to me to click on it anyway but as to the other - nada.

YouTube.com makes money the old fashioned (circa 1998) way: by convincing people of how much money they’re making and then waving away offers of investment (“Oh, we just can’t deal with any more money, it’s flowing out of our bathtubs as it is!”) until someone comes along and offers them a big enough pile of money. Then the new investors/buyers realize they have a big inflated white elephant on their hands, so then they start talking up how profitable it is (“You won’t believe what we paid for it; only $400 million, it was a real steal! I just don’t know what we’re going to do with all the profits now that the DoE won’t let us store the excess in Yucca Mountain…”) until an international syndicate of media magnates makes a bid on it and integrates it into their “Total Media” empire.


Google paid a huge amount of money for that add. They paid $1.65 billion in google stock when they purchased youtube.

Youtube gets a good chunk of money from advertising firms wishing their videos to have preferred placement on the youtube homepage. Advertisers want people to see their videos. In fact, right now there are 4 videos at the top of the homepage dedicated to a movie that is coming up for release. In less than 2 days the videos uploaded by this “director” have garnered over 600,000 views. I am going to bet that Sony did not pay less than 6 figures for this.


[hijack] Me too! I discovered her on youtube, had never heard of her before, now I’m a fan.

Okay, an answer that makes sense. Now I feel like I understand. (Yes, I work for the folks that paid billions for… um, another big white internet elephant. Say no more…)

Ignore the advertising for the moment, it’s a complete red herring. It’s highly unlikely that Youtube is even breaking even on advertising.

If you’re asking how Chad & Steve planned to make money, the web 2.0 standard business plan has been focused on getting a large base of users and leave worries about monetization to a later date. Once you have enough users, inevitable a monetization plan works out somehow. The wisdom of this approach is yet to be fully tested and it may be one of those dumb ass ideas just like in the web 1.0 days but it seems to have worked for Youtube and also for Google. One of the more interesting chapters about Google’s history is just how close they came to shutting down due to lack of a viable monetization strategy. People think the genius of Google lay in Pagerank but if they had not come up with adsense or adsense had not worked, there would be no Google today.

If you’re asking how Youtube makes money for Google, well, Google’s mission statement is to “organise the world’s information” and youtube was such an obvious acquisition target for them that they really had no choice not to buy it. Google could see that videos were going to become the next big information source on the web and they needed to maintain dominance in that space. Part of what they paid for was the brand, they were hoping that web video and Youtube would become so linked that they could leverage off the brand name. Part of it was the people and expertise, Youtube have been at video for longer than anyone and learnt more lessons than any other company. Google tried at online video and they couldn’t do it, they want to know how to do it right. Part of it is in achieving synergy, by understanding how people search for videos, they better understand search in general which makes all of their search better which improves all of Google. And part of it is just that Google is Google, Google is known for either building or buying the best of everything, if you want a calender, you try out Google Calender, if you want email, you use Google Mail, to lose Youtube to a competitor would have been a major embarrassment.

The advertising revenue could be a rounding error as far as Google is concerned, they’re in for much bigger reasons than that.

And I suppose, as someone pointed out on the other thread, Google didn’t really pay $1.65bn, they just transferred stock to that (nominal) value. The Google’s stock went up so they ended up worth probably the same as before, plus the YouTube holding.

I guess, as with many things, the answer is that once you have a certain critical mass of money (or at least appear to), other people’s money will become gravitationally attracted to you. Kind of like a big Dollar Black Hole, or something.

Now, I have £12.76 in my pocket. Who wants to send me 50p to invest in, um, an employee nutrition programme?

Also, Google was spending a lot of money on Google Video for no real gain. Buying YouTube solved that problem.

I think a lot of people vastly overestimate how much it costs to run youtube. When it was bought there were less than 50 working there. Bandwidth is really not that expensive and the content is free.

Hey, I’m jub being kind of tongue-in-cheek, here. Google makes money by convincing marketers that it’s worth spending tens or hundreds of thousands of dollars to advertise on Google-owned Internet properties. It’s a well known fact that most advertising dollars are wasted ineffectually, but it’s almost impossible to determine beforehand which monies are spent with good effect and which are squandered, so putting budget into click-throughs on YouTube.com makes sense to someone. And advertising is the art of catching people unawares and creating the almost inevitably artificial need for your product to fill the void in their empty, worthless lives. Or, as explained in the film Roger Dodger:Roger: You can’t sell a product without first making people feel bad.
Nick: Why not?
Roger: Because it’s a substitution game. You have to remind them that they’re missing something from their lives. Everyone’s missing something, right?
Nick: I guess.
Roger: Trust me. And when they’re feeling sufficiently incomplete, you convince them your product is the only thing that can fill the void. So instead of taking steps to deal with their lives, instead of working to root out the real reason for their misery, they go out and buy a stupid looking pair of cargo pants.

In that context, advertising on YouTube.com may actually be a brilliant strategy. Plus, now Google can hold viral marketing campaigns hostage until they pony up a random to let their videos be shown on YouTube.com.


1% of 5 million is 50,000.

But i’d be very surprised if the click rate was as high as 1%.

Sorry, looking back at my last reply it sounds like I was being sarcastic. I wasn’t, and your response did make sense. And I actually do work for a company that spent a fortune on one of these “trendy” internet sites that doesn’t actually make any money, so I can see exactly where you’e coming from.