Thursday, April 17, 2008

Google Is Saved! YouTube Money Machine Mints $1 CPMs*

Google Is Saved! YouTube Money Machine Mints $1 CPMs*

Henry Blodget | April 16, 2008 9:07 PM

Source: Silicon Valley Insider

Waiting for the explosion of YouTube video revenue to spark the next
wave of torrid Google (GOOG) growth? Better curl up like Rip Van Winkle.
Judging by the miniscule commissions Google just paid out to its
production partners, you'll be waiting for years.

As SAI's Vas Sridharan reports
iously_> , YouTube proudly reported that it has shelled out...ONE
MIIIIIILLLLLLLION producer partners in the past four
months. The producer of one video, the 2-million-view smash hit "Break a
Leg," got a check for $1,600--which equates to a net $0.80 CPM.

As we recall, Google is pretty generous with its producer partners,
giving them about 75% of the gross revenue. If so, this means Google
grossed about $2,133 on those 2 million views, or a CPM of about $1. Of
this, Google got to keep about $500--or $0.25 per thousand. [*UPDATE:
Liz Gannes at New Tee Vee was kind enough to note that Google sent her a
note saying it has different deals with different production partners.
So let's be conservative and assume that Google is hosing the Break a
Leg auteur and keeping 75% of the money. It's still a lousy CPM]

According to Comscore, YouTube streamed about 3.4 billion videos in
January. If YouTube generated a net $0.25 CPM on all of them, it would
log about $850,000 of revenue per month, or a run-rate of about $10
million a year. Yes, YouTube doesn't have to pay production partners on
all videos. But a vast percentage of YouTube videos are also completely

According to New Tee Vee
<> , JP
Morgan Stearns analyst Bob Peck estimates that YouTube will clock about
$100 million of revenue this year, of which only $20 million will come
from overlay ads (presumably the kind that YouTube is paying a split to
production partners on). The rest will come from display advertising on
the video pages.

Based on paltry $1 million YouTube has paid to production partners in
the past four months, this revenue estimate looks pretty accurate.
Unfortunately, on a base of $20 billion of search and AdSense revenue,
it's also immaterial.

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