Peter Kafka

Recent Posts by Peter Kafka

Is YouTube Finally Ready to Turn a Profit This Year?

kingkonglivesStarting last summer, Google executives have consistently promised that YouTube was close to becoming profitable. When will that finally happen?

This year, says Barclays analyst Douglas Anmuth. He predicts that the video site will see revenue jump 55 percent, to $700 million, in 2010, and that it will “start contributing positively” to the Google’s earnings.

Why? Because YouTube is ginormous, of course. But also because the company has become more sophisticated about advertising. (Note that Google content guru David Eun said much the same thing when I talked to him last month, specifically citing the Google’s integration of DoubleClick).

Here’s the relevant part of Anmuth’s note:

Perhaps the main take-away for Google’s display business is that in 2010 we believe YouTube will start contributing positively to EPS. An improving advertising environment certainly helps, but with YouTube monetizing more than 1 billion video views every week, and with strong sell-out rates on its home-page from larger advertisers–we note 90% of the top 50 Ad Age have advertised on YouTube–we believe the site can profitably take share of the branded display & video market. We project YouTube to generate $700 million in revenue in 2010, up 55% Y/Y. Usage continues to grow. In November the total number of YouTube’s videos viewed grew 139% to 12.2 billion in November and unique visitors grew 32% Y/Y to 129 million. As a comparison, Hulu, the second most popular video site by videos viewed according to comScore, recording 923 million videos viewed.

Of course, the standard caveats that Google (GOOG) uses when people generate less flattering estimates for YouTube also apply here. It’s very difficult to get a handle on how many pages/views Google is selling and how much it gets for each one. It’s also tricky to guesstimate how much Google is spending to serve more than a billion video streams a day. So at best, this is an educated guess.

Still, it will be interesting to see if Google concurs with Anmuth. We’ll hear from Eric Schmidt et al in a week when the company reports fourth-quarter earnings.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik