How much is YouTube worth?
I just read this post on A VC titled YouTube’s Potential Revenue. I was thinking about posting a comment, but decided to turn it in to a full blown post on my blog.
On A VC Fred speculated that YouTube could right now make a potential of $153 million net revenue a year. Sounds reasonable. However, this number is based on these assumptions: that 80% of the videos are monetizable (ie, no copyright problems) and that YouTube would make an average CPM of $15. Ouch.
First, how about that 80% number?
I have been looking at YouTube a little closer recently, specifically at music videos. I have not yet not been able to find a music video on there. Every single obscure European black metal band I can think of — its there. That is telling me that YouTube is more than the Napster of video. YouTube is more like the illegal Wikipedia of video content. Granted, it would be a lot bigger if they still allowed lengthy videos instead of clips..
Tracking down and striking liscencing agreements with all of these video copyright holders is a huge deal. Often in content production and liscencing agreements concerning the distribution mediums allowed. That means if something goes on DVD as opposed to broadcast TV, contract terms change. Throw in to the mix thousands upon thousands of independent content producers over a period of decades. Its a brutal mess. There are libraries of content — videos, movies, games, music — that is dead simply because no one even knows who owns them anymore.
Ok, now this $15 CPM number. I’m thinking it would probably average out to a few dollars. I don’t know what percentage of Youtube is international traffic. I suspect some “hot” content or geotargetted ads could hit $15, but average that out with everything else — its not happening anytime soon.
My numbers — 15% of YouTube’s content is monetizable. A generous CPM of $2.50 is given. Total revenue from advertising is $6,159,375.00. After bandwidth and other overhead YouTube is deep in the read.
The key here is how much of the corporate branding dumb money YouTube can get. The big spenders can waste $15 CPM. Performance marketers watching their ROI can’t.
I think your numbers are much more realistic than Fred’s. I like reading A VC but I find his projections as well as the whole VC industry rarely fall in line with what’s realistic when the internet is concerned.
Comment by Marc — September 10, 2006 @ 4:37 am
[…] Many are wondering how much YouTube is worth. There are many ways to monetize a web site. […]
Pingback by How much is YouTube worth? — September 10, 2006 @ 6:47 pm
I think you’re numbers are very far off. Where did you get the total traffic numbers? I think, if you look at MySpace(#6), a company ranked only a little higher than YouTube (#10), you will see the potential. MySpace was purchased for about $580 million last year and now, based on the guaranteed revenue from Google and other advertisers of at least $500 million per year, they would have a market value, if public, of about $10 Billion, based on the current P/E ratio of similar sector properties.
I think Google made an incredible decision to buy the property at an amount that can only be described as cheap. Their solution will undoubtably become as popular, if not more, as MySpace.com. Lest not forget that a single MySpace provile can contain multiple YouTube Videos. I think, if monetized correctly, based on current traffic increases, their company will be worth about the same as MySpace by next year, about $10 Billion.
hhmmm, buy a company for $1.6 Billion and expect a 1000% return on your investment, not bad if you ask me. We’ll see how it goes.
- Gary
Comment by G.Pick — October 12, 2006 @ 9:04 pm