Im guessing most people have stumbled across you tube.  Probably the biggest internet video sharing system in the world right now (makes google and MSN videos look like toys).

What I dont understand is how are they making money?  In fact how are they even operating?

Theyre one of the highest traffic websites on the internet right now with more users than mysapce, digg.com, delicious and all the big websites out there and they allow you to upload and then download high quality video for free with no logins etc.

Not only that but they process and reencode thousands if not tens of thousands of movies a day, host them and then live stream them to anyone.  Thay also make it trivial to include them on your own website without you even having to link to their main site or even credit them.

I just dont get it and its been bugging the hell out of me since it popped into my head this afternoon at work.  Anyone got any ideas how theyre doing it?

I started thinking that but it makes no sense.

If theyre making no revenue then all it takes is for a movie company or similar to sue for copyright infringement and the company will simply fold as they wont be able to pay any legal costs to defend themselves.

Google and MSN have large market share and already have better distribution systems and ways of making ccash from their videos so why would they ever buy out you tube...  Unless Im missing something.  I guess they could simply be cockblocking google and MSNs markets so they have to be bought out and shut down.  While Microsoft might go down that route Google wouldnt from its "dont be evil mantra" and you tube pretty much created the market in the first place - i.e. that cant have been their original plan for surviving.

Their bandwidth costs must be approaching the half million dollars a month mark as a ballpark and thats ignoring the cost of hardware to actually serve up the amounts of data they store, etc.  They have been running a long time now and even if my estimate of bandwidth cost is way out thats still demands a huge operating budget if they have zero income.

About the only two ways I can think of them making money in future is:

1) drop adverts into the video streams (theyve said theyll never do this)

2) streaming porn and movies when their userbase is high enough on pay per view systems.


But I cant work out whos paying for it at the moment just to keep the lights on.

You guys may be interested to hear that YouTube have changed their T&C to say now by uploading user content, you transfer all rights on said clip to YouTube. They own it, can do with as they wish. Expect to see even more copyright infringement cases brought against them in the coming months!


I believe they initially wanted to offer a completely free service to grow market awareness, then switch to some sort payment system... I think they must of factored in a massive reduction in traffic once this happens, but if you build up the initial user base and manage to hold onto a small percentage it may be good enough. Then again the vast majority of YouTubes users are teenagers.

I read another interesting point recently, can you see many mainstream advertisers placing their ads on the site, when they dont know what content it might be associated with?

http://en.wikipedia.org/wiki/Youtube

theyll start charging soon i bet

and also viral advertising is becoming more popular

Expect to see an over priced IPO coming to a market near you soon  

what you mean like google

like when everyone was saying - I dont understand their business model - they only do advertising etc..

well take a look at the 2 year chart

http://uk.finance.yahoo.com/q/bc?s=GOOG&t=2y&l=on&z=m&q=l&c=

perhaps they are overpriced at the moment - i havent looked into it tbh...

my point was in reference to the overpriced IPO comment

people were slagging off the google IPO & clearly they were quite underpriced at the time