Google spins YouTube into future profit machine

Fed up with all the speculation over the financial health of YouTube, Google has fought back in classic Google fashion - i.e. it's burbling vague claims that can only lead to more speculation.

In April, a free-thinking Credit Suisse analyst told the world that YouTube was on pace to lose $470.6 million this year, and ever since, the weberati have fallen all over themselves trying to conjure the site's bottom line.

Naturally, Google won't say how much YouTube is losing. But somewhere inside the Mountain View Chocolate Factory, someone has decided it's time to spin the conversation towards the notion that YouTube is a latent money machine.

Last week, during the company's quarterly earnings call, Google vp Jonathan "Perfect Ad" Rosenberg told analysts and reporters that "[YouTube's] monetized views more than tripled over the past year," numbering "in the billions" each month.

That tells you close to nothing about the site's revenues - or even how many of its videos are actually paired with ads. But Google CFO Patrick Pichette insisted that YouTube isn't all that far from actually making some money. "What we can tell you is that we're really pleased with the trajectory of YouTube, and we're really pleased with its revenue growth," he said. "In the not too distant future, we see a very profitable business for it."

Not to be outdone, YouTube's PR types soon turned up to make some vague claims of their own. On Monday, with a post to the YouTube Biz blog, Chris Dale and Aaron Zamost engaged in what they called "YouTube myth busting," invoking that urban-legends-obsessed American TV show.

"One of our favorite shows at YouTube is Mythbusters," they wrote. "Even though we're not drafting big rigs, or getting shot by 20,000 paintballs, we like to do a little myth busting as well."

Echoing recent claims from RampRate - an opinionated San Francisco IT research and consulting firm - the YouTubers indicated the company isn't losing as much as that Credit Suisse thinks. But like Patrick Pichette, they wouldn't provide a number.

"The truth is that all our infrastructure is built from scratch, which means models that use standard industry pricing are too high when it comes to bandwidth and similar costs," they wrote. "We are at a point where growth is definitely good for our bottom line, not bad." Many, including RampRate, have pointed out that Google can use all that YouTube traffic to boost its position with peering partners and reduce rates when purchasing bandwidth wholesale.

The PR pair also hope to convince the world that YouTube is an advertiser's dream. "Over 70% of Ad Age Top 100 marketers ran campaigns on YouTube in 2008," they said. "They're buying our home page, Promoted Videos, overlays, and in-stream ads. Many are organizing contests that encourage the uploading of user videos to their brand channels, or running advertising exclusively on popular user partner content."

That may be. But it was midway through 2008 that Eric Schmidt said Google hadn't "figured out the perfect solution of how to make money" from the YouTube, before a company ad guru admitted that Madison Avenue and Silicon Valley "don't really know how to talk to each other."

The post goes on to say that YouTube is "now helping partners generate revenue from hundreds of millions of video views in the US every week." It's another echo from Thursday's earnings call, but at least one pundit has seized this single sentence and turned it into another multi-paragraph YouTube revenue guessing game. The myths live on. As Google prefers it. ®

Bootnote

Speaking of Mythbusters: CNN recently interviewed the show's hosts, discussing recent efforts to disprove the notion that Apollo 11 didn't actually land on the moon. It's not much of an interview. But it's worth watching for the clip at the tail end, where a moon landing denier confronts Buzz Aldrin, calling him a liar and a coward - before Aldrin clocks him with a right hook: