6 ms·

YouTube Is Doomed

52 points by dsil 18y ago

dsil 18y ago
Found via http://www.marginalrevolution.com/ http://www.marginalrevolution.com/ , a great, very readable blog about economics.
- tjic 18y ago
  Why in heck was this voted down? Marginal Rev is a fascinating blog, and it this comment is by the guy who posted an article that rose to the front page, explaining "not only is this article fascinating, but there's a lot of other fascinating stuff at location X on the internet".
TweedHeads 18y ago
Oh gawd, not again...
- abstractbill 18y ago
  I've seen enough of these stories recently that part of me wonders if Google is deliberately trying to spread the idea that youtube isn't, and can never be, profitable. I can see a few ways in which it would benefit them to have the division perceived as such.
  - TweedHeads 18y ago
    I wouldn't say google is spreading FUD about themselves, but I know of one company that has a big budget for propaganda.
zandorg 18y ago
I previously mentioned that if video was just a 9mb file on someone's website, like a HTML page or GIF, it would kill YouTube. I'm not sure about the bandwidth requirements for the more popular sites, though.
- jonknee 18y ago
  ... And yet sites like Flickr are huge even though JPGs are as easy as anything to post on your own website.
  - randallsquared 18y ago
    Posting and management tools are important, in other words.
    - jonknee 18y ago
      And community.
  - vjt 18y ago
    video/image hosting is not the point, it's community that counts here: youtube is just a vehicle to deliver your video to more eyeballs, because poking around youtube is easier for the joe user, rather than poking around the 'net. also, as others have pointed out, bandwidth is cheaper for google rather than for the private VPS that hosts your site.
axod 18y ago
Where is the actual data for these articles? Does anyone have a link to the actual figures Credit Suisse put together, with explanations as to where the figures came from?
- mattmaroon 18y ago
  http://www.multichannel.com/article/191223-YouTube_May_Lose_470_Million_In_2009_Analysts.php http://www.multichannel.com/article/191223-YouTube_May_Lose_... As with all analyst estimates, you can't totally bank on accuracy, but I'd have a hard time believing they're far off.
  - jim-greer 18y ago
    Really? I bet they are way, way off. "To arrive at the estimated $360 million bandwidth tab for YouTube, the analysts assumed the site will receive 375 million unique visitors in 2009 and that a maximum of 20% of those users are on the site at any given time." There's no way 20% of visitors are streaming video simultaneously. I doubt it's even 1%. Kongregate maxes out at about 0.5% of its monthly uniques connected to chat at once.
    - qeorge 18y ago
      http://www.answers.com/maximum http://www.answers.com/maximum
  - angstrom 18y ago
    Spouting speculative bullshit seems to be the cheapest way to create news. Same website, but other end of the spectrum speculating YouTube will make $500 Million: http://www.businessinsider.com/analyst-youtube-revenues-will-hit-500-million-this-year-2009-3 http://www.businessinsider.com/analyst-youtube-revenues-will...
  - tomsaffell 18y ago
    OK, here goes some back-of-the envelope math (risky business in this group, so looking forward to hearing what I'm doing wrong..). Where I have made assumptions, I have erred on the side of 'expensive', i.e. this should be an upper bound estimate: 75,000,000,000 streams/year 400 kbps (average bw) average stream length: 300 s (stream length, not video length, highball estimate) -> BW/year = 1.13e9 GB/year 0.1 $/GB (BW cost, based on AWS S3 prices, again a highball) -> BW cost ~= $113m / year Only 1/3 of the estimated amount, and I'm not taking account of any clever stuff YT do to lower the costs. What gives? Is this a peak BW issue?
Anon84 18y ago
"Rumours of YouTube's demise have been greatly exaggerated" -- Mark Twain
- sketerpot 18y ago
  "I may not agree with what you have to say, but I will defend to the death your right to misattribute it to Voltaire." -- Voltaire (Seriously, though, YouTube as a company may or may not prosper, but YouTube-style streaming online video isn't going anywhere. So for most of us, the whole issue is moot.)
wmeredith 18y ago
Why can't they just charge a membership fee to upload? Would it be way too expensive?
jpwagner 18y ago
Generalization: With no change (in product itself or demand for that product), a product's current margin is unsustainable in the long run.
pedalpete 18y ago
Isn't this the great flaw in the author's theory? ' It seems safe to assume that YouTube’s traffic will continue to grow, with no clear ceiling in sight. Since the majority of Google’s costs for the service are pure variable costs of bandwidth and storage...' If traffic grows, and bandwidth and storage are the highest costs, then revenues should increase while costs decrease as bandwidth and storage costs come down. Or is there something else I'm missing there.
- mattj 18y ago
  He says later that youtube is big enough that they've maxed out their economies of scale (hence costs won't come down, which seems like a reasonable argument). The real flaws with this article are that user content is growing geometrically compared to paid content (citation? where does he get this from), along with the fact that the author is the CEO of fliqz.com - a video streaming company. Good job reporting conflict of interest, business insider.
  - dandelany 18y ago
    These are two different issues. Economies of scale are cost advantages that businesses obtain by expanding. Web Startup X starts out in a rented office with their content sitting on externally hosted servers, since they're too small to buy their own space/servers. At some point, they have enough users and cash that it becomes much more cost effective to build a datacenter and host everything in-house. Youtube has gone through many of these stages, culminating in the Google purchase, and are now the big fish, with no more economies of scale left. They already have datacenters worldwide, and global name recognition. No matter how much they continue to grow, they will not become more profitable due to growth alone. However, the other issue here is the exponentially rising value of computing technology, especially in bandwidth and storage space. It's why you paid $3500 for a 5MB hard drive in 1981 when you can get 200,000x the space for 2% of that price today. This fact, which has nothing to do with economies of scale, is why Youtube's profit should increase to >0 someday. The question is whether Google can (or will) wait that long.
ams6110 18y ago
Nothing useful can stay free forever.
- tjic 18y ago
  Yeah, the Emacs and Linux fees these days are outrageous.
  - Dilpil 18y ago
    Forever is a ways away. Of course, this line of argument is rather vacuous...
neilk 18y ago
Says the CEO of a competitor.
- Retric 18y ago
  Yep, "they’ve already reached the point at which no greater economies of scale remain, the costs of the business will continue to grow on a linear basis." This is wrong on several levels. YouTube helps Google reach even larger economies of scale. Granted YouTube is still going to end up as a net loss, but things like heath care become cheaper per person as the company grows. However, over the next 10 years hardware and bandwidth is going to get even cheaper. While moving to HD will probably eat most of that benefit, I still think YouTube will break in the not so distant future.
  - mattmaroon 18y ago
    Health care stops becoming cheaper per person at some number far below what Google has exclusive of YouTube. The same is true of most things.
    - Retric 18y ago
      Your forgetting about overhead. They spend K + Nx so cost per person is x + K/N which drops as N increases. Granted for companies the size of Google K is small relative to Nx but it's still a large number. PS: Management tends to work the other way, so cost per person is ~x + Log(N) but generally speaking it's a net win to increase the size of the company.
nopinsight 18y ago
Issues with the article's arguments: 1. Costs >> Since the majority of Google’s costs for the service are pure variable costs of bandwidth and storage, and since they’ve already reached the point at which no greater economies of scale remain, the costs of the business will continue to grow on a linear basis. Costs of bandwidth and storage will continue to decrease, perhaps geometrically, in the foreseeable future, and so is Youtube operating cost. 2. Monetization There must be other ways to monetize the eyeballs that have not been fleshed out in full yet. It's still very early days. The author assumes that YouTube has mostly run out of ways to monetize through ads (although he did point out a subscription model, esp. for marketers.)
- ivankirigin 18y ago
  Bandwidth is decreasing, but resolution is increasing. They'll push as many pixels as is feasible, so I'd expect costs to be static.
  - abstractbill 18y ago
    I suspect bandwidth costs are decreasing at a rate that's faster than the increase in resolution of display devices though, and there's no point pushing more pixels than the best display has.
    - iigs 18y ago
      I suspect you're right, and this is a double-whammy when you consider that excluding file sharing, there's no significant driver for internet bandwidth above a small fraction of (even USA) broadband installations. You can stream HD video in 2mbit, and virtually all of the content on YouTube is drastically lower native bitrate than this (and transcoded to 300-384kbps). The elephant in the room is that YouTube should have given Google the "first mover advantage" and control of the legal feature-length TV episode (and perhaps movie) space, giving them the revenue of the popular, high-rate advertising to bear the load of the "uninteresting and unwatchable" (mind you that unwatched media has no bandwidth costs associated with it, reducing it to a storage expense alone). Hulu blindsided Google and now Google's best bet is to pull a Microsoft and iterate and hope for their competitor to slip. This is complicated by the fact that Hulu is backed by the content producers themselves.
LostInTheWoods 18y ago
The mathematics of most sites, especially the super large ones like Youtube and Facebook, simply do not add up. They are putting all their chips down on some profitable future that I just don't see materializing. Giving aways tons of content, functionality and bandwith is simply not a sustainable operation. In my opinion, the future of the internet will contain a lot of toll booths or perhaps we will find a better way. These large monolithic web services just does not seem the way to go.
- ewjordan 18y ago
  One could easily have said the same thing of Google's search business itself, which gives away tons of functionality and bandwidth. The real question is whether online advertising will ever bring CPMs in line with TV or print advertising. Personally, when I hear about YouTube not being able to place ads on most of their user-generated videos, it makes me immediately stop and think: is this perhaps just a huge market hole, and a big opportunity for anyone willing to pay for ads on those videos? Are the eyeballs on user-generated videos really worth less than those on professionally produced ones, or is it just that most of the big advertising spenders are nervous about associating themselves with lower quality or potentially offensive content? Further, are online eyeballs really worth that much less than TV eyeballs? I still think it's possible that reduced online CPMs may come up naturally over time as more of the entertainment market shifts online. If this is the case there's not much Google can do to help the situation, but it may be worth holding out a while longer to see if things normalize a little bit. Then again, it's also definitely possible that either a) print/TV advertising rates are a lot higher than they "should" be, and the only reason TV has been able to sustain itself on ads is that advertisers were getting ripped off but couldn't figure out a way to prove it to themselves, or b) online eyeballs are inherently worth less, perhaps due to demographic issues. If either of those is true, free video on the Internet may be fundamentally unsustainable until bandwidth costs come down substantially.
mpk 18y ago
YouTube never made sense. It was geared to be bought out from the start. I like watching videos on youtube as much as the next person, but according to the numbers ... youtube is in the red (never mind that Google will keep pumping money into it for the time being). Serving up content costs money. Period. And youtube serves up a lot of content. The only reason Google bought youtube and continues to run it at a loss is because they hope to monetize it somewhere in the future. This kind of strategy isn't new (cough XBox cough) and it may or may not pay off somewhere along the line. Google's acquisition of youtube was a gamble and an attempt to move into yet another market. Will this pay off? Who knows, but one interesting aspect is that Google isn't identifying itself branding-wise with youtube. If they flush youtube down the toilet tomorrow it will have an almost minor impact on the Google brand.
tdavis 18y ago
Wait a second here! This guy is saying Google can't monetize a video site made up almost entirely of illegal content with an enormous user-base consisting mostly of people with an intelligence level and attitude roughly equal to a toddler on meth?! That's just crazy talk! YouTube will make tons of money, just you wait! Just like Facebook! I mean, there must be some way to monetize millions of users no matter what!
shimon 18y ago
This argument only makes sense if you believe Google's ability to generate money from YouTube will actually get worse as YouTube becomes more popular. Why? Because bandwidth is getting cheaper. It won't be long before running YouTube costs half as much per visitor as it does today, so even if their cash potential per visitor stays the same, they will eventually break even. On top of this, Google has some of the lowest bandwidth costs on Earth. They have massive peering and lots of their own wires; to suppose that they pay anything near what a startup video company would pay for bandwidth is ludicrous. But if you want to make YouTube look unsustainable, it helps to subtract a profitable network business from the bottom line. Yes, YouTube might cost a lot for a few years, but if it retains its dominance for another three to five years, it will become ridiculously profitable.
paul7986 18y ago
I wonder if they could build into Chrome a P2P video streaming client? Utilize users bandwidth.
knightinblue 18y ago
"Youtube Is In Trouble" is one thing, but "Youtube Is Doomed"? There's linkbait and then there's businessinsider.com
iamelgringo 18y ago
I've actually long thought that Google's YouTube acquisition wasn't purely to get into the online video market. It was all about the huge corpus of video that they acquired. Let me explain. Google's general game plan is this: massive compute clusters + massive datasets + Phd CS brains trying to do something cool. My bet is that Google thought that having the world's largest video dataset was well worth the $2.5 billion they spent to buy YouTube. It's still worth $0.5 billion a year for them to keep maintaining it. I don't think that they are going to be panicking about monetizing YouTube any time soon. That's not the reason they bought the company.

52 points by dsil 18y ago

dsil 18y ago

Found via http://www.marginalrevolution.com/ http://www.marginalrevolution.com/ , a great, very readable blog about economics.

tjic 18y ago
Why in heck was this voted down? Marginal Rev is a fascinating blog, and it this comment is by the guy who posted an article that rose to the front page, explaining "not only is this article fascinating, but there's a lot of other fascinating stuff at location X on the internet".

TweedHeads 18y ago

Oh gawd, not again...

abstractbill 18y ago
I've seen enough of these stories recently that part of me wonders if Google is deliberately trying to spread the idea that youtube isn't, and can never be, profitable. I can see a few ways in which it would benefit them to have the division perceived as such.
- TweedHeads 18y ago
  I wouldn't say google is spreading FUD about themselves, but I know of one company that has a big budget for propaganda.

zandorg 18y ago

I previously mentioned that if video was just a 9mb file on someone's website, like a HTML page or GIF, it would kill YouTube. I'm not sure about the bandwidth requirements for the more popular sites, though.

jonknee 18y ago
... And yet sites like Flickr are huge even though JPGs are as easy as anything to post on your own website.
- randallsquared 18y ago
  Posting and management tools are important, in other words.
  - jonknee 18y ago
    And community.
- vjt 18y ago
  video/image hosting is not the point, it's community that counts here: youtube is just a vehicle to deliver your video to more eyeballs, because poking around youtube is easier for the joe user, rather than poking around the 'net. also, as others have pointed out, bandwidth is cheaper for google rather than for the private VPS that hosts your site.

axod 18y ago

Where is the actual data for these articles? Does anyone have a link to the actual figures Credit Suisse put together, with explanations as to where the figures came from?

mattmaroon 18y ago
http://www.multichannel.com/article/191223-YouTube_May_Lose_470_Million_In_2009_Analysts.php http://www.multichannel.com/article/191223-YouTube_May_Lose_... As with all analyst estimates, you can't totally bank on accuracy, but I'd have a hard time believing they're far off.
- jim-greer 18y ago
  Really? I bet they are way, way off. "To arrive at the estimated $360 million bandwidth tab for YouTube, the analysts assumed the site will receive 375 million unique visitors in 2009 and that a maximum of 20% of those users are on the site at any given time." There's no way 20% of visitors are streaming video simultaneously. I doubt it's even 1%. Kongregate maxes out at about 0.5% of its monthly uniques connected to chat at once.
  - qeorge 18y ago
    http://www.answers.com/maximum http://www.answers.com/maximum
- angstrom 18y ago
  Spouting speculative bullshit seems to be the cheapest way to create news. Same website, but other end of the spectrum speculating YouTube will make $500 Million: http://www.businessinsider.com/analyst-youtube-revenues-will-hit-500-million-this-year-2009-3 http://www.businessinsider.com/analyst-youtube-revenues-will...
- tomsaffell 18y ago
  OK, here goes some back-of-the envelope math (risky business in this group, so looking forward to hearing what I'm doing wrong..). Where I have made assumptions, I have erred on the side of 'expensive', i.e. this should be an upper bound estimate: 75,000,000,000 streams/year 400 kbps (average bw) average stream length: 300 s (stream length, not video length, highball estimate) -> BW/year = 1.13e9 GB/year 0.1 $/GB (BW cost, based on AWS S3 prices, again a highball) -> BW cost ~= $113m / year Only 1/3 of the estimated amount, and I'm not taking account of any clever stuff YT do to lower the costs. What gives? Is this a peak BW issue?

Anon84 18y ago

"Rumours of YouTube's demise have been greatly exaggerated" -- Mark Twain

sketerpot 18y ago
"I may not agree with what you have to say, but I will defend to the death your right to misattribute it to Voltaire." -- Voltaire (Seriously, though, YouTube as a company may or may not prosper, but YouTube-style streaming online video isn't going anywhere. So for most of us, the whole issue is moot.)

wmeredith 18y ago

Why can't they just charge a membership fee to upload? Would it be way too expensive?

jpwagner 18y ago

Generalization: With no change (in product itself or demand for that product), a product's current margin is unsustainable in the long run.

pedalpete 18y ago

Isn't this the great flaw in the author's theory? ' It seems safe to assume that YouTube’s traffic will continue to grow, with no clear ceiling in sight. Since the majority of Google’s costs for the service are pure variable costs of bandwidth and storage...' If traffic grows, and bandwidth and storage are the highest costs, then revenues should increase while costs decrease as bandwidth and storage costs come down. Or is there something else I'm missing there.

mattj 18y ago
He says later that youtube is big enough that they've maxed out their economies of scale (hence costs won't come down, which seems like a reasonable argument). The real flaws with this article are that user content is growing geometrically compared to paid content (citation? where does he get this from), along with the fact that the author is the CEO of fliqz.com - a video streaming company. Good job reporting conflict of interest, business insider.
- dandelany 18y ago
  These are two different issues. Economies of scale are cost advantages that businesses obtain by expanding. Web Startup X starts out in a rented office with their content sitting on externally hosted servers, since they're too small to buy their own space/servers. At some point, they have enough users and cash that it becomes much more cost effective to build a datacenter and host everything in-house. Youtube has gone through many of these stages, culminating in the Google purchase, and are now the big fish, with no more economies of scale left. They already have datacenters worldwide, and global name recognition. No matter how much they continue to grow, they will not become more profitable due to growth alone. However, the other issue here is the exponentially rising value of computing technology, especially in bandwidth and storage space. It's why you paid $3500 for a 5MB hard drive in 1981 when you can get 200,000x the space for 2% of that price today. This fact, which has nothing to do with economies of scale, is why Youtube's profit should increase to >0 someday. The question is whether Google can (or will) wait that long.

ams6110 18y ago

Nothing useful can stay free forever.

tjic 18y ago
Yeah, the Emacs and Linux fees these days are outrageous.
- Dilpil 18y ago
  Forever is a ways away. Of course, this line of argument is rather vacuous...

neilk 18y ago

Says the CEO of a competitor.

Retric 18y ago
Yep, "they’ve already reached the point at which no greater economies of scale remain, the costs of the business will continue to grow on a linear basis." This is wrong on several levels. YouTube helps Google reach even larger economies of scale. Granted YouTube is still going to end up as a net loss, but things like heath care become cheaper per person as the company grows. However, over the next 10 years hardware and bandwidth is going to get even cheaper. While moving to HD will probably eat most of that benefit, I still think YouTube will break in the not so distant future.
- mattmaroon 18y ago
  Health care stops becoming cheaper per person at some number far below what Google has exclusive of YouTube. The same is true of most things.
  - Retric 18y ago
    Your forgetting about overhead. They spend K + Nx so cost per person is x + K/N which drops as N increases. Granted for companies the size of Google K is small relative to Nx but it's still a large number. PS: Management tends to work the other way, so cost per person is ~x + Log(N) but generally speaking it's a net win to increase the size of the company.

nopinsight 18y ago

Issues with the article's arguments: 1. Costs >> Since the majority of Google’s costs for the service are pure variable costs of bandwidth and storage, and since they’ve already reached the point at which no greater economies of scale remain, the costs of the business will continue to grow on a linear basis. Costs of bandwidth and storage will continue to decrease, perhaps geometrically, in the foreseeable future, and so is Youtube operating cost. 2. Monetization There must be other ways to monetize the eyeballs that have not been fleshed out in full yet. It's still very early days. The author assumes that YouTube has mostly run out of ways to monetize through ads (although he did point out a subscription model, esp. for marketers.)

ivankirigin 18y ago
Bandwidth is decreasing, but resolution is increasing. They'll push as many pixels as is feasible, so I'd expect costs to be static.
- abstractbill 18y ago
  I suspect bandwidth costs are decreasing at a rate that's faster than the increase in resolution of display devices though, and there's no point pushing more pixels than the best display has.
  - iigs 18y ago
    I suspect you're right, and this is a double-whammy when you consider that excluding file sharing, there's no significant driver for internet bandwidth above a small fraction of (even USA) broadband installations. You can stream HD video in 2mbit, and virtually all of the content on YouTube is drastically lower native bitrate than this (and transcoded to 300-384kbps). The elephant in the room is that YouTube should have given Google the "first mover advantage" and control of the legal feature-length TV episode (and perhaps movie) space, giving them the revenue of the popular, high-rate advertising to bear the load of the "uninteresting and unwatchable" (mind you that unwatched media has no bandwidth costs associated with it, reducing it to a storage expense alone). Hulu blindsided Google and now Google's best bet is to pull a Microsoft and iterate and hope for their competitor to slip. This is complicated by the fact that Hulu is backed by the content producers themselves.

LostInTheWoods 18y ago

The mathematics of most sites, especially the super large ones like Youtube and Facebook, simply do not add up. They are putting all their chips down on some profitable future that I just don't see materializing. Giving aways tons of content, functionality and bandwith is simply not a sustainable operation. In my opinion, the future of the internet will contain a lot of toll booths or perhaps we will find a better way. These large monolithic web services just does not seem the way to go.

ewjordan 18y ago
One could easily have said the same thing of Google's search business itself, which gives away tons of functionality and bandwidth. The real question is whether online advertising will ever bring CPMs in line with TV or print advertising. Personally, when I hear about YouTube not being able to place ads on most of their user-generated videos, it makes me immediately stop and think: is this perhaps just a huge market hole, and a big opportunity for anyone willing to pay for ads on those videos? Are the eyeballs on user-generated videos really worth less than those on professionally produced ones, or is it just that most of the big advertising spenders are nervous about associating themselves with lower quality or potentially offensive content? Further, are online eyeballs really worth that much less than TV eyeballs? I still think it's possible that reduced online CPMs may come up naturally over time as more of the entertainment market shifts online. If this is the case there's not much Google can do to help the situation, but it may be worth holding out a while longer to see if things normalize a little bit. Then again, it's also definitely possible that either a) print/TV advertising rates are a lot higher than they "should" be, and the only reason TV has been able to sustain itself on ads is that advertisers were getting ripped off but couldn't figure out a way to prove it to themselves, or b) online eyeballs are inherently worth less, perhaps due to demographic issues. If either of those is true, free video on the Internet may be fundamentally unsustainable until bandwidth costs come down substantially.

mpk 18y ago

YouTube never made sense. It was geared to be bought out from the start. I like watching videos on youtube as much as the next person, but according to the numbers ... youtube is in the red (never mind that Google will keep pumping money into it for the time being). Serving up content costs money. Period. And youtube serves up a lot of content. The only reason Google bought youtube and continues to run it at a loss is because they hope to monetize it somewhere in the future. This kind of strategy isn't new (cough XBox cough) and it may or may not pay off somewhere along the line. Google's acquisition of youtube was a gamble and an attempt to move into yet another market. Will this pay off? Who knows, but one interesting aspect is that Google isn't identifying itself branding-wise with youtube. If they flush youtube down the toilet tomorrow it will have an almost minor impact on the Google brand.

tdavis 18y ago

Wait a second here! This guy is saying Google can't monetize a video site made up almost entirely of illegal content with an enormous user-base consisting mostly of people with an intelligence level and attitude roughly equal to a toddler on meth?! That's just crazy talk! YouTube will make tons of money, just you wait! Just like Facebook! I mean, there must be some way to monetize millions of users no matter what!

shimon 18y ago

This argument only makes sense if you believe Google's ability to generate money from YouTube will actually get worse as YouTube becomes more popular. Why? Because bandwidth is getting cheaper. It won't be long before running YouTube costs half as much per visitor as it does today, so even if their cash potential per visitor stays the same, they will eventually break even. On top of this, Google has some of the lowest bandwidth costs on Earth. They have massive peering and lots of their own wires; to suppose that they pay anything near what a startup video company would pay for bandwidth is ludicrous. But if you want to make YouTube look unsustainable, it helps to subtract a profitable network business from the bottom line. Yes, YouTube might cost a lot for a few years, but if it retains its dominance for another three to five years, it will become ridiculously profitable.

paul7986 18y ago

I wonder if they could build into Chrome a P2P video streaming client? Utilize users bandwidth.

knightinblue 18y ago

"Youtube Is In Trouble" is one thing, but "Youtube Is Doomed"? There's linkbait and then there's businessinsider.com

iamelgringo 18y ago

I've actually long thought that Google's YouTube acquisition wasn't purely to get into the online video market. It was all about the huge corpus of video that they acquired. Let me explain. Google's general game plan is this: massive compute clusters + massive datasets + Phd CS brains trying to do something cool. My bet is that Google thought that having the world's largest video dataset was well worth the $2.5 billion they spent to buy YouTube. It's still worth $0.5 billion a year for them to keep maintaining it. I don't think that they are going to be panicking about monetizing YouTube any time soon. That's not the reason they bought the company.