During a conference call with investors about Google’s Q1 earnings, CEO Eric Schmidt made some interesting comments about YouTube. To give you some background about this: last week, David Silversmith published estimates about how much Google is losing on YouTube, which came down to over a million dollars a day:
To support those visitors, Google (Nasdaq: GOOG) will spend more than $2 million dollars daily — to be exact, up to $2,064,054 a day, or $753 million annualized, according to Internet Evolution calculations of YouTube’s costs derived from a range of sources, including Bear Stearns & Co. Inc. , comScore, Credit Suisse, and Google itself.
Now, Google does not disclose sales figures by division, so there is no definitive revenue number for YouTube. The range of estimates from financial analysts stretches from a low of $90 million (Bear Stearns) to a high of $240 million (Credit Suisse).
Of course, some investors were not happy about this; Youssef Squali from Jefferies & Co asked this question to Schmidt:
And then, if I may, on YouTube, Eric, you seem to be getting some traction with the studios getting short and long form content. Is the model, as you see it, ad-based only or do you see a potential for some fee-based, potentially even some subscription model as the platform evolves.
The answer to this surprised me; Google has traditionally been making money on ads alone, and so far all other revenue streams are dwarfed by the amount of money brought in by their ad sales. But apparently they want to try selling videos on YouTube, and we’ll be getting an official announcement about this soon:
With respect to how it will get monetized, our first priority, as you pointed out, is on the advertising side. We do expect over time to see micro payments and other forms of subscription models coming as well. But our initial focus is on advertising. We will be announcing additional things in that area literally very, very soon.
So apparently even Google is feeling pressure from its investors and can’t afford to keep projects that bleed money at the rate YouTube does running indefinitely.