Why YouTube’s 1 Billion Viewers Still Aren’t Enough To Turn Profit
YouTube has succeeded in establishing itself as the premier destination for online video consumption, so how is it possible for a platform with an audience exceeding 1 billion viewers to remain an unprofitable business? It's really quite simple.
YouTube is stuck.
The company is treading water – while top competitors are gaining ground.
According to the Wall Street Journal, YouTube's posted revenue of $4 billion in 2014 (up $1 billion from the year previous) and 6% contribution to Google's sales did not yield a profit. In fact, reportedly, the online video platform is barely breaking even.
Facebook, by stark comparison, reported over $12 billion in revenue, turning $3 billion in profit with their 1.3 billion users in 2014. Adding insult to injury, both Facebook and Twitter are working on in-house video options which will detract significantly from traffic previously directed towards YouTube.
Spinning their wheels in the rut of a primarily teen/tween based audience, YouTube has been unsuccessful in gaining the traction necessary to meaningfully expanding it's reach.
in 2012, YouTube shifted gears in attempt to create an online video experience for users that mirrored traditional television while offering an user driven alternative, but the high concentration of "junk" content populating YouTube has contributed to the lack of the concept's adoption. Combatting an over saturated market while competitors pull ahead with custom built, in-platform video players is, by and large, not boding well for YouTube.
Attempts at upping subscription based revenue doesn't look too promising for YouTube either. After a lackluster launch of YouTube Music Key, Google executive Susan Wojcicki has a mess on her hands and a lot on her shoulders as she heads into her second year running YouTube. With YouTube already shoveling out bonuses to keep key content contributors on their platform, and the possibility of continued declining profit margins for Google on the forecast, odds of a competitive budget remaining in place to invest in new content and better services are ever fading. And behind the scenes the record labels are demanding more money.
If YouTube can't catch up, they're going to find themselves falling behind. While service upgrades such as auto-play and Google ad integration are being promised in the near future, one can't help but wonder if the best days for this online video giant are behind them.