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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 sin

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.
    - tjmc 18y ago
      The thing that hackers (pg included) fail to understand about video online is that there is no first mover advantage. There's no network effects. There's little if any brand loyalty. It's about IP ownership of popular content. Who cares if YouTube is big? Without the rights to the most popular content, they're stuck trying to make money out of dog weddings and tearful tirades about Britney with 13 hours of additional low quality crap uploaded every minute. The content owners who setup Hulu are under no pressure from them whatsoever. Google paid $1.65 billion for YouTube. It has never made a cent and its running costs are now equivalent to a small airline. Really, this is a no brainer. Shareholders should be asking for someone's head on a platter.

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.
  - tjmc 18y ago
    The thing that hackers (pg included) fail to understand about video online is that there is no first mover advantage. There's no network effects. There's little if any brand loyalty. It's about IP ownership of popular content. Who cares if YouTube is big? Without the rights to the most popular content, they're stuck trying to make money out of dog weddings and tearful tirades about Britney with 13 hours of additional low quality crap uploaded every minute. The content owners who setup Hulu are under no pressure from them whatsoever. Google paid $1.65 billion for YouTube. It has never made a cent and its running costs are now equivalent to a small airline. Really, this is a no brainer. Shareholders should be asking for someone's head on a platter.