6 ms·

Google Is Saved! YouTube Money Machine Mints $1 CPMs

26 points by twampss 19y ago

volida 19y ago
that seems to be on purpose because of the potential of violating copyright or until they find a good way to generate more money or until YouTube grows so big that will be an unevitable source for video (oh yes it's already that) no revenue, no money to pay them in case you get sued. which is why YouTube LLC still exists independently.
marcus 19y ago
Unfortunately the estimated cost for the infrastructure was about 1$CPM http://www.techcrunch.com/2006/04/30/did-youtube-just-raise-another-25-million/ http://www.techcrunch.com/2006/04/30/did-youtube-just-raise-... 35M daily videos watched = 1000M monthly videos watched monthly infrastructure cost was estimated to be 1M USD Which means at 1$ CPM you are barely breaking even. And that is without any revenue sharing costs. Perhaps Google had better economy of scale but I doubt its an order of magnitude better.
- brlewis 19y ago
  In 2008, I'm impressed with any online video company barely breaking even. I figure today's ventures are just attempts to build a brand in anticipation of when costs come down and profitability is realistic.
  - marcus 19y ago
    I just reran the numbers a bit through S3 calculator and came up with 780K per month at that traffic level, so costs are already dropping but still not a very big profit margin, and that is assuming you can put ads on all your videos and you get to keep the entire 1$ CPM. And if someone puts any ads on my family birthday videos I'll be irked.
    - cstejerean 19y ago
      I assume Google can do this cheaper than your S3 calculations. Amazon still needs to make a profit on the hosting so I assume their actual cost of providing the service is much lower. I'm not sure exactly how much lower since I don't know Amazon's margins. Anyone care to take a guess?
      - marcus 19y ago
        Not entirely sure Amazon makes a profit on S3. They might be offering it at a price lower than cost too, to establish themselves trusting costs to go down.
        mattmaroon 19y ago
        Or profiting from the storage and selling bandwidth at or near cost.
- patrickg-zill 19y ago
  However bandwidth and computers and disks (storage) keep dropping every year. So if they are breaking even now, in 12 months they will be making 10-20% .
mrtron 19y ago
Various Facebook ad neworks offer CPMs in the range of about 1-10 cents. Now, you aren't dealing with nearly the bandwidth costs...
willz 19y ago
I think people got this all wrong. The money-making potential of videos should be compared with televisions, not clicks. One hour of YouTube time should eventually make about the same amount of money than one hour of TV, that's the future and that's its potential. The cost, of course, will be lower. To achieve this, YouTube may need enterprise sales etc. But these are just means, the primary goal is still to get people spend time on online video.
- allertonm 19y ago
  How is the cost lower, for comparable quality content? It seems to me that YouTube has higher costs per viewer than conventional TV, and that production quality must be at least as good as regular TV to attract the same ad revenue.
  - SwellJoe 19y ago
    I have to agree here on cost...broadcast television effectively gets its bandwidth for free. Then again, with peering deals, Google is probably getting it for pretty close to free. What changes is the competitive landscape--when there are a billion videos to choose from, as opposed to 20 or 50 or even 100 found on broadcast or cable or satellite, the eyeballs on any one drop. Obviously the aggregator is the natural place to sell the ads (bully for Google), but the ability to focus efforts on "blockbuster" shows is a bit different. I worked in television for several years right out of college, and blockbusters are a major part of the operating budget of a TV station because it's a limited commodity--if you want to advertise during Lost, you've only got one company to buy from and there's only a couple dozen slots for sale. Cheaper spots are actually often more effective (since you can run them a lot more and get a single viewer to see your ad multiple times), but there's still magical thinking in TV advertising and advertisers like to reach the blockbuster audience. When the blockbuster no longer exists (as seems likely in a future of a billion+ possible videos), monetization will shake out differently. But advertising isn't going away, so something will happen and it'll all work out somehow.
  - willz 19y ago
    The cost is in distribution. How many people work in the TV industry to deliver the shows to the TV viewers vs how many people work in YouTube.

26 points by twampss 19y ago

that seems to be on purpose because of the potential of violating copyright or until they find a good way to generate more money or until YouTube grows so big that will be an unevitable source for video (oh yes it's already that) no revenue, no money to pay them in case you get sued. which is why YouTube LLC still exists independently.

marcus 19y ago

Unfortunately the estimated cost for the infrastructure was about 1$CPM http://www.techcrunch.com/2006/04/30/did-youtube-just-raise-another-25-million/ http://www.techcrunch.com/2006/04/30/did-youtube-just-raise-... 35M daily videos watched = 1000M monthly videos watched monthly infrastructure cost was estimated to be 1M USD Which means at 1$ CPM you are barely breaking even. And that is without any revenue sharing costs. Perhaps Google had better economy of scale but I doubt its an order of magnitude better.

brlewis 19y ago
In 2008, I'm impressed with any online video company barely breaking even. I figure today's ventures are just attempts to build a brand in anticipation of when costs come down and profitability is realistic.
- marcus 19y ago
  I just reran the numbers a bit through S3 calculator and came up with 780K per month at that traffic level, so costs are already dropping but still not a very big profit margin, and that is assuming you can put ads on all your videos and you get to keep the entire 1$ CPM. And if someone puts any ads on my family birthday videos I'll be irked.
  - cstejerean 19y ago
    I assume Google can do this cheaper than your S3 calculations. Amazon still needs to make a profit on the hosting so I assume their actual cost of providing the service is much lower. I'm not sure exactly how much lower since I don't know Amazon's margins. Anyone care to take a guess?
    - marcus 19y ago
      Not entirely sure Amazon makes a profit on S3. They might be offering it at a price lower than cost too, to establish themselves trusting costs to go down.
      - mattmaroon 19y ago
        Or profiting from the storage and selling bandwidth at or near cost.
patrickg-zill 19y ago
However bandwidth and computers and disks (storage) keep dropping every year. So if they are breaking even now, in 12 months they will be making 10-20% .

mrtron 19y ago

Various Facebook ad neworks offer CPMs in the range of about 1-10 cents. Now, you aren't dealing with nearly the bandwidth costs...

willz 19y ago

I think people got this all wrong. The money-making potential of videos should be compared with televisions, not clicks. One hour of YouTube time should eventually make about the same amount of money than one hour of TV, that's the future and that's its potential. The cost, of course, will be lower. To achieve this, YouTube may need enterprise sales etc. But these are just means, the primary goal is still to get people spend time on online video.

allertonm 19y ago
How is the cost lower, for comparable quality content? It seems to me that YouTube has higher costs per viewer than conventional TV, and that production quality must be at least as good as regular TV to attract the same ad revenue.
- SwellJoe 19y ago
  I have to agree here on cost...broadcast television effectively gets its bandwidth for free. Then again, with peering deals, Google is probably getting it for pretty close to free. What changes is the competitive landscape--when there are a billion videos to choose from, as opposed to 20 or 50 or even 100 found on broadcast or cable or satellite, the eyeballs on any one drop. Obviously the aggregator is the natural place to sell the ads (bully for Google), but the ability to focus efforts on "blockbuster" shows is a bit different. I worked in television for several years right out of college, and blockbusters are a major part of the operating budget of a TV station because it's a limited commodity--if you want to advertise during Lost, you've only got one company to buy from and there's only a couple dozen slots for sale. Cheaper spots are actually often more effective (since you can run them a lot more and get a single viewer to see your ad multiple times), but there's still magical thinking in TV advertising and advertisers like to reach the blockbuster audience. When the blockbuster no longer exists (as seems likely in a future of a billion+ possible videos), monetization will shake out differently. But advertising isn't going away, so something will happen and it'll all work out somehow.
- willz 19y ago
  The cost is in distribution. How many people work in the TV industry to deliver the shows to the TV viewers vs how many people work in YouTube.