Peter Kafka

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YouTube’s Gigantic Year Is Already Here, Citi Says

Is Google making money off of YouTube? You betcha, Google execs told shareholders today, without offering the slightest bit of detail. Par for the course.

So, in lieu of real numbers from Google, here’s a Wall Street estimate: Google is making a ton of money from YouTube.

More specifically: The video site should generate more than $3.6 billion in gross revenue this year, says Citi’s Mark Mahaney. After distributing some of that to partners, Google probably records net revenue of $2.4 billion, he says.

Mahaney is a Google bull, and has been arguing that investors have been overlooking YouTube’s value in particular. But in this case, Mahaney is sort of criticizing himself. Because, last year, when he guessed at YouTube’s 2012 revenue, he thought it would do a mere $1.7 billion.

Why is he even more optimistic now?

Basically, because YouTube’s traffic continues to grow, even though it’s already ginormous — comScore has it posting 20 percent growth, quarter after quarter. And because Google is sticking more ads on more videos, Mahaney says in a note today. He’s also bullish about the early results from its “channel” project, but doesn’t seem to be factoring in a bump from that yet.

YouTube’s Salar Kamangar is pushing the channels concept because he doesn’t think YouTube gets paid nearly enough for the eyeballs it delivers to advertisers, and he thinks that making the site look and act a bit more like TV will bump its value.

But it’s already enormously valuable, Mahaney argues. For context: His 2012 revenue estimate “is likely 50% greater than Yahoo!’s Display Advertising total and right-in-line with Netflix’s total subscription revenue. We really doubt whether most investors realize how big/important YouTube has become.”


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work