Would Facebook be worth the billions that they have been touted for even though they make much less? Again, it boils down to value, and that is what the buyers see is worth.

YouTube should, with the help of Google’s Engineers and Resources, be able to convert the company into a machine that should be able to generate over $100 million this year. At the same multiple, that translates into a worth of about $5 Billion.

Google paid for the deal in cash so the deal, overall, was a steal for Google, especially considering the current trajectory of the site’s traffic puts in on course to be the single number one site on the Internet by the end of this year. With those users, the revenue potential could even exceed the 45% of the revenue currently generated from Google’s main site http://www.google.com.

http://www.digital50.com

In the end, it’s all about ITP and context.

Maybe this is why Microsoft is suddenly aggressive on the copyright front:

http://www.nyti...a/06speech.html

The same thing could have been said about Napster. Didn’t people learn from the first bubble that a massive audience does not always translate into massive profits (or any profits at all)? Especially when that audience has been built on the backs of content owners who you haven’t had to pay for licenses.

It’s going to take a bit of luck, smart negotiating, a real business model and humility for Google to make YouTube work. The challenges, namely copyright issues and arrogance at the negotiating table, seem to be hampering Google’s efforts. When Joost, a beta-stage startup with a fraction of YouTube’s current audience, can strike a deal with Viacom and Google can’t, it tells you that audience is almost meaningless if you don’t know how to leverage it properly.

“sure there revenue is only 15M, but they’ll more than break-even in the greater realm when it’s all said and done”

“Breaking even” is not a phrase that you like to hear when you just spent $1.65 billion on something that has high operational costs and only generated $15 million in revenues in the preceeding year. Just to put things in perspective: if Google took $1.65 billion in cash and invested in instruments that paid 1% interest, it would make $16.5 million each year (before compounding), which is more than YouTube is generating in revenues. Even if YouTube is able to increase revenues to $100 million/year, it would technically take 16 years to “break even” (although it paid in stock so the calculation is not as clear cut) and while nobody can guarantee much, I can guarantee that within that timeframe, somebody will come up with the “next big thing” that outshines the YouTubes of the world. YouTube’s only real asset is its audience and brand. It doesn’t have any defensible technology and there are a ton of other YouTube wannabes that have been well-funded and have deals with content owners.

The revenue numbers released highlight something that a lot of Web 2.0 observers should pay attention to: despite the rosy projections that a lot of people come up with for popular startups, reality is almost always quite different. I, and others, have argued before that YouTube’s problem is that most of its inventory is probably not saleable. Major brands and advertisers don’t want to be associated with video content that is unknown and may be offensive, and YouTube’s primary driver for popularity was not user-generated content, but rather professional content like the Daily Show, music videos, etc. That content is saleable to major brands and advertisers but Google seems inept at closing some of the big licensing deals it needs.

“The price they paid for YouTube will look like pennies on the dollar by 2010.”

Is that because you’re predicting massive inflation or are you doubling up on Dvorak’s projections? Who knows what will happen by 2010. I think it’s a bit of a stretch to predict where the Internet will be then, especially since there’s enough debate over where the global economy will be (and the two are directly linked for obvious reasons). Look at how fast the Internet startup landscape has changed in the past 3 years. Most of it couldn’t be predicted, just as nobody predicted that a little search engine with a funny name could dethrone the major players of search at the time (Yahoo, Altavista, etc.). Bottom line: predicting where YouTube will be in 3 years is like predicting the weather in New York on March 6, 2010.

youtube has amassed too big an an audience for something to not work out
i just don’t see it.

sure there revenue is only 15M, but they’ll more than break-even in the greater realm when it’s all said and done

Revenues are low because Google can only sell advertising around the content they have licensed, or on their index pages. Unfortunately for Google, if you look at CBS, NBA (and i guess bad for me ), BBC, there are no ads sold. So I would say the revenues are probably LOWER now than in 2006 because Youtube was more desperate and probably took business that Google would not.

Overtime they will obviously go up, but their legal bills, content licensing bills and overhead bills will go up faster. They have put themselves in a very difficult position to monetize content.

THe smartest thing they are doing is the user optin for video that will allow them to sell ads on a users video. Not because that is a unique idea, but because most people will opt in and the requirement for Google to clear copyrights on those videos will reduce their risks and increase their inventory.

The bad thing for those that opt-in, is that if they upload infringing content and it makes it on to Youtube, then the users will no longer be anonymous and you can bet that media companies will issue supoenas and will take action against Youtube users.

Combine that with copyright owners gathering at the gates with lawsuits and it wont be cheap or pretty in the end

And all they have to do is change over to confirming copyrights prior to posting and all these hassles go away…

But I put my money on Google. They are out there driving, thinking, figuring it out. And they’ll make this work. After all, wasn’t it only $1.6B? :p

There is a ton of potential in a ton of ideas…it’s all a matter of how to realize that potential though.

Micah
http://foodfore...t.wordpress.com

but still, it’s all about audience, and they’ve got it. eventually bandwidth and data will be “too cheap to meter” & the only thing that matters is market share.

Let’s face it, it is about reach and distribution, and Gootube has it