© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
March 21, 2013 2:39 am
Google announced that its YouTube video site has hit a billion regular visitors, matching a similar milestone reached by Facebook last October, as mobile devices and global internet growth power web companies to unprecedented scale.
“If YouTube were a country, we’d be the third largest in the world after China and India,” YouTube said in a blogpost announcing on Wednesday evening that it now has a billion unique visitors every month. “Nearly one out of every two people on the internet visits YouTube.”
However, the huge user numbers raise questions about the costs of serving bandwidth-intensive video to so many users and whether the eight-year-old site can generate a profit for Google – and its content partners.
YouTube launched in February 2005, a year after Facebook, and in its early years was run from a small office above a fast-food restaurant in San Mateo, California. It provided a new way for anybody with a broadband connection to upload and distribute their video online, sparking a boom in user-generated content and what would become known as social media.
It also popularised instant streaming, rather than having to wait to download a file.
By October 2006, YouTube and its 67 staff had already attracted a loyal audience of 34m monthly visitors who watched 100m clips every day, when Google swooped. The search giant made what was then its largest acquisition, paying $1.65bn in stock for the young company that was at the time still struggling with copyright lawsuits, rocketing bandwidth costs and little to no revenues.
YouTube now receives the second-most search queries of any site in the world, behind only Google’s own search page, and is a challenger to Facebook as the world’s largest social network.
Its millions of bedroom webcam confessionals and skateboarding cats have been joined by a burgeoning industry of professional producers, such as Machinima, a video network for gamers, Vice Media, a news and entertainment publisher, and Vevo, for music videos.
YouTube also is exploring charging users cable-style subscriptions for some of these channels as it looks to compete with Netflix and Hulu - and with traditional broadcast television.
The recent phenomenon of South Korean pop hit Gangnam Style, which became the first YouTube video to reach 1bn views and has now reached almost 1.5bn, underlines the international platform for artists and brands that the site provides.
However, YouTube’s global, open network has sometimes run into controversy, with countries such as Turkey and Pakistan banning YouTube for hosting videos that they say were offensive to their citizens.
As Google’s “fingerprinting” technology began to weed out pirated content from YouTube, the advertising industry warmed to the site’s offer of TV-style video ads combined with the interactivity and metrics of the web. YouTube said that it now counts all of AdAge magazine’s top 100 brands among its advertisers, although Google has never said whether the site is profitable.
In a digital advertising market projected to be worth $42bn in the US alone this year, according to eMarkerer, online video is increasing its share, from 8 per cent today to 15 per cent of internet spending.
But as mobile makes up an increasing portion of video viewing, monetisation becomes more challenging.
Brian Wieser, analyst at Pivotal Research, estimates that YouTube generated $1.3bn in video advertising last year, with many hundreds of millions of dollars more likely to be generated from search and banner advertising on the site.
“It’s possible that the more successful YouTube is [among users], the less successful it is financially,” Mr Wieser said. “We just don’t know. Increasing users is important but what really matters is whether they are getting more advertisers and whether they are growing that faster than the capital and operating costs.”
Analysts estimate that only around 10 per cent of YouTube’s video is monetised.
YouTube’s announcement comes after reports that Yahoo is in discussions to take a majority stake in DailyMotion, a YouTube competitor owned by France Telecom.
France Telecom and Yahoo have not commented on the news, which was first reported by the Wall Street Journal, but people familiar with the companies told the Financial Times that talks are at an early stage and may involve other strategic and financial investors as DailyMotion looks to expand in the US.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in