YouTube could be digging itself a giant hole, according to Credit Suisse analysts Spencer Wang and Kenneth Sena. The analysts estimate that YouTube will generate about $240 million in revenue in 2009, but will have to outlay $711 million for transit, licensing, storage and other expenses, for a yearly loss of close to $470 million.
That's a huge amount to bankroll, even for the mighty Google.
"In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetized (likely through more deals with content companies) and to drive more advertiser demand through standardization of ad formats and improved ad effectiveness," the analysts wrote
While the revenue projections for YouTube show strong 20 percent growth over 2008, the volume of traffic it streams, coupled with the amount it has to pay for premium content licenses may not ever equal a sustainable, profitable business. The analysts came to their projections by considering YouTube's reported traffic, estimating average streaming speed, length of time end users spend on the site, and average CPMs on content.
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