Is YouTube the Most Powerful Video Portal in the World?
While Google (NASDAQ:GOOG) continues to refuse to give any details about YouTube’s financial performance, estimates have the world’s biggest video site generating $1.6 billion in revenue this year. Anthony DiClemente of Barclays Capital estimates that YouTube commands a staggering 80% of Web video revenues, estimating the entire market at roughly $2 billion this year.
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If DiClemente’s estimates are right, the video site’s revenue has finally synced up with what Google paid for it five years ago. However, DiClemente’s numbers may be a bit off, given that Hulu (NASDAQ:CMCSA) has said it will do more than $500 million in 2011, the majority of which will come from advertising. If both of those numbers are accurate, the two sites would essentially account for video ad spending in the world.
Still, DiClemente’s estimates bring up the question as to whether YouTube has turned profitable. The site has been pushing for premium content, working on deals with Hollywood as part of a strategy to create videos that will command more ad dollars than the normal YouTube fare. As the most dominant video site online, and the most profitable as well, such deals may not be necessary, and could the expense of soliciting new premium content could hurt the site’s profit margins.
Instead of trying to compete with Comcast (NASDAQ:CMCSA), Netflix (NASDAQ:NFLX), DirecTV (NASDAQ:DTV) and every other media platform out there, Google has given $100 million to dozens of partners to create new “channels” that will feature original content, much like that the site is known for, but with a twist: it will feature people you’ve heard of, like Madonna, Jay-Z, Ashton Kutcher and “Modern Family” star Sofia Vergara.
Hulu was created as a joint effort between Disney (NYSE:DIS), NBCUniversal (NASDAQ:CMCSA), and Fox (NASDAQ:NWSA) so that they could control how their content was being viewed online. It also gave the site exclusive rights to a lot of their content, ensuring the site’s success. By creating its own content, Google hopes to do the same with YouTube.