YouTube Has More Expenses Than Revenue

    April 6, 2009

First, the good news. YouTube is the most popular video site on the Internet. They’ill make $240 million in revenue. They just signed a deal with Disney to help bring in that money. But the bad news is pretty bad—$711 million in expenses, according to Credit Suisse.

About half of that bill is bandwidth alone, $360 million. Don’t worry, Credit Suisse showed its work:

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. Credit Suisse’s analysis then assumed each user downloads a video at 400 kilobits per second, to yield a peak bit run-rate for YouTube of 30 million megabits per second.

Other reports have placed YouTube’s revenue this year anywhere from $120 million to $500 million.

Of course, bandwidth costs aren’t new: Facebook has been battling rising costs and falling revenue-per-users for some time. On the other hand, YouTube has been searching for effective monetization basically since Google acquired the company.

What do you think? Can YouTube make money to sustain itself long enough to find a business model that really works?