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 the

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.