How does YouTube make so much money?

[TimPoet]

Lately while viewing youtube videos I noticed the absence of ads.

What gives? How can they be raking in the billions with no ad revenue?

[Stuey]

My father asked me the same thing abotu two weeks ago.

Look closer, there are in fact ads and some sponsorship. On the homepage, I see a plug for Verizon Wireless, and two mentions of sending video Valentines Day cards.

They MUST be getting some revenue from this.

Think about it - if they earn a fraction of a penny profit from each view, after the overhead costs for the bandwidth are covered - they're still racking in the big bucks.

I went to the site to see if there were indeed any ads. In less than two minutes, I sent two emails to my gf - one with a link to a sleepy kitty, and another with a link to a sneezing panda bear. Youtube sees a LOT of activity.

[TimPoet]

But the thing is, they used to have banner ads atop every video they showed. Now they got messages touting their services. That has to have been a tremendous cut in revenue... They are generating profits somehow. I just want to know how.

[FLG]

Id assume since they get so many hits a day that advertisers have to pay more for even a little spot.

[mairving]

Youtube hasn't made any money yet. Right now they are in the churn and burn mode of basically building traffic to their site.

Their business model is:

Business Model YouTube is pursuing advertising as its business model, and is exploring a range of possibilities including promotions, sponsorships, contextual-based advertising, traditional banner advertising, etc. But more than anything else, we're committed to providing the best consumer experience to watch, upload, and share videos. When building a community, it is critical to get the model right.

More info here.

[TimPoet]

Originally Posted by mairving Youtube hasn't made any money yet.

I think you mean they haven't generated a profit, yet. They've brought in millions, haven't they?

Well, after some googling, I think you're right, mairving, they have yet to produce much revenue. Their value is all about the potential of their huge user base. The million video feeds a day.

Still, they used to have banner ads over each video screen. Now they don't. That has to represent a lot of lost money.

Errr, correction, that's 100 million videos a day.

[mbossman2]

while the yutube technology is exciting and has a ton of potentional, I view youtube as the exciting tech company du jour. There were tons of similar businesses during the tech boom in the late 90's that shot up like a skyrocket and fizzled out just as fast.

it is quite possible the Youtube might stay at the top of the mountain and be the martket leader for years and years to come, it is also quite possible that they might end up on the technical business trash heap with all the other failed business models.

While understand the importance of advertising and marketing, I am still not 100% sold on the effectiveness and impact of internet advertsing. I, personally, no longer "see" it, ads have just become part of the background noise and not something that i apy any particular attention

[David M]

In a nutshell:
Revenues...what you make before paying the expenses.
Earnings...what you have after paying the expenses.
Profit...a not very well defined word for earnings because there are different types of earnings. Profit is a pretty generic term.