By Sahil Patel
YouTube is profitable. That shouldn’t surprise anyone.
What could raise an eyebrow or two (or several million) is a report published by The Information (subscription required) that says YouTube isn’t as profitable as what many believe. According to the report, which cites two unnamed sources, YouTube made $3.5 billion in revenue in 2013. After creator payouts, the net revenue stood at $1.5 billion.
For context, Google grossed $58 billion last year, which would mean YouTube only accounted for 7% of its parent company’s annual revenues.
The search giant does not disclose revenue numbers for the video site, so all we have to go on are reports and analyst estimates.
And on those terms, YouTube isn’t faring as well as what others have previously predicted. For instance, an eMarketer report from earlier this year projected that YouTube made $5.6 billion in gross revenue in 2013, with $2 billion in net revenue. Two years ago, an analyst at Citi estimated that YouTube would gross $3.6 billion and net $2.4 billion in 2012.
Again, it should be noted YouTube is profitable. The point here is that it’s (allegedly) not making as much money as what everyone thought.
There will be attempts to compare these numbers to other giants in the online video space. And the problem is, when it comes to YouTube, there really isn’t a fair comparison. Some will point to Netflix, which along with YouTube commands most of the internet’s downstream traffic. Netflix did $4.3 billion in revenue last year. But Netflix is nothing like YouTube — the business models don’t match.
That said, it’s up to recently appointed CEO Susan Wojcicki to steer YouTube’s growth. The executive helped build Google’s advertising business into the juggernaut it is today, and has reportedly already working to build the site’s relationship with Madison Avenue and Hollywood.
Another area of growth: According to The Information, former YouTube CEO Salar Kamangar set a performance goal of 1 billion hours of watch-time per day by 2016. As of now, YouTube averages 300 million hours of viewership a day, up from 100 million in 2012.