Spencer Wang, an analyst with stock broking giant Credit Suisse, has issued a damning report on YouTube with a suggestion that the operation will make a loss of over $450 million this year. While there is no doubt that parent company Google has significantly increased exposure and traffic on the website since acquisition it would appear that income generated during 2009 will be significantly less than operating costs.
The information supplied by Spencer Wang suggests that operating costs of $700 million will be experienced in 2009 against income of just $240 million. The problem seems to be with regards to advertising on YouTube pages where a reported 97% of pages on the site do not have any advertising displayed. Whether this is a reflection of the ongoing economic downturn around the world, very early stage issues with the system or perhaps a sign that YouTube advertising will not be as great as Google had expected remains to be seen.
The same report also highlighted the fact that bandwidth costs will approach $350 million this year and account for more than half of the operational costs of the business. While looking at YouTube on its own, and not as part of Google, maybe a little misleading there is no doubt the operation has not been as successful as Google had expected, at least not so far.