A Very Lucrative Offer

  By Shamus   Oct 11, 2006   9 comments

Everyone linked this story already, so I’m sure you’ve heard the news: Google has purchased YouTube for 1.5 billion.

YouTube hosts videos and lets people watch them for free. They incur massive storage and bandwidth fees, and they get nothing in return. Unless they find a way to convert movies of people falling over and getting hit in the head into currency, (which is not currently possible outside of Japan) it will continue to lose money. If the site becomes more popular, they will lose more money.


This is just a taste of what Google got for its $1,500,000,000.00.

How much do they lose? How many programmers and sysadmins does it take to keep the show running? How many lawyers are needed to deal with the low level legal sniping that is always going on against high-profile companies that tangle with intellectual property? How many accountants are required to compile the annual summary of how much money has been thrown down the rat hole? Do they hire a graphic artist to print out an 8×10 laminated bar graph of their profits as it plunges deeper into the red with each passing month? What is the bill at the and of all of this? Five million? Twenty-five million?

I don’t have the numbers on hand and I lack the motivation to see if it is available online. So, in order to figure out the net annual losses of YouTube I’ll simply have to turn to the science of statistics. By calculating the average between my two random guesses, we can see that YouTube loses fifteen million dollars a year.

My site here has much the same problem. It operates at a net loss, paying out about $11 in hosting fees each month and bringing in no income. If we count in annual domain renewal, then it becomes clear that our monthly losses may be as high as $12, or $144 annually. This means Twenty Sided makes $14,999,856 more than YouTube each year.

Dear Google,

I would like to make it known that the site Twenty Sided is available for acquisition. Please realize that $14,999,856 is a lot of money, and if YouTube is worth 1.5 Billion then you should expect to need some real money if you want to get your hands on something as profitable as Twenty Sided. I’m including all of the archives in the sale, and if it helps to close the deal I’m even willing to stay on board in some sort of figurehead or advisory position while you hire the team that will work on the re-branding and creating future content.

You don’t want to wait for this to turn into a bidding war, so please get in touch with me soon.

Thank You,

Shamus Young

9Nine comments.


  1. BeckoningChasm says:

    Wow, what a great idea! I’m gonna get on the money train too. Easy Life, here I come!

  2. Evil Otto says:

    Well, *you* just don’t understand business. YouTube’s method for turning a profit is simple. They just…

    LOOK OVER THERE! SOMETHING DISTRACTING!

    (zoom)

  3. Pete Zaitcev says:

    Shamus, rememebr that Google has its own YouTube, called Google Video. You probably thought that Google Video was a search engine like Google Images, only for videos? No, it wasn’t. It started together with YouTube and did the same thing. Then it tanked. So, this purchase compensates for that little fart. All that remains is jettisoning the old Google Video.

    Now all they have to do is
    – Buy LiveJournal and ditch Blogger
    – Buy Facebook and ditch Orkut

    Not all Google projects flop. For instance, they do not have to buy AIM from TimeWarner to get a halfway decent chat, because they have one of their own. And their webmail beats the pants off Yahoo and Hotmail.

    Now, if you’re interested just how they plan to make money with all that, I have no idea.

  4. Shamus says:

    * You are right: I did think Google Video was just a video version of image search. Interesting.

    * Having never used either, I don’t have any idea what the differences are in regards to LiveJournal vs Blogger.

    Not all Google projects flop.

    Yeah, they have that search engine thing which I hear is doing alright.

    Now, if you’re interested just how they plan to make money with all that, I have no idea.

    This is really bugging me. We’ve been up and down the dot-com thing. Everyone has seen that making cool stuff != money. Nobody spends 1.5b without thinking things through first. How do they plan to keep this thing from eating away at them, to say nothing of making their 1.5b back?

    I’d love to know.

  5. […] It seems everyone and their kid sister is looking at the You Tube deal and going, “WTF? How the hell do they expect to make any money out of that?” I was scratching my head too, until the answer came to me, naturally enough, while reading a blog. In fact, this one, where Shamus poses that very question. And once it occured to me, I had to go “OMFG, it’s brilliant! Why didn’t I think of that!” (The answer is, of course, because I’m not brilliant, and I don’t have a billion and a half just lying around to do it.) […]

  6. Mark says:

    The only thing I can think of is if Google can figure out a way to insert advertising on videos that aren’t copyrighted (perhaps like the way zefrank does with the show). They have to be careful, because they obviously can’t insert advertisements on copyrighted stuff, but that might at least start to bring in revenue.

    There could be a strategy whereby Google attempts to roll a pay-for service into YouTube. It’s become a popular and powerful brand. Perhaps not as popular as iTunes, but maybe Google figures that they can make a web-based competitor (at least, for their video services).

    Like you, I’m still a little confused at why YouTube commanded a price of $1.5 billion. They must have something up their sleeve, but then, we could be seeing a new Google bubble. They’ve had pretty good fortune so far, but I’m seeing some stuff that points towards a downturn. For example, I attended a usability conference this week and one of the speakers had recently done a usability test on sites using Google Adsense. He noticed that they were much less attractive these days than they had been initially (too many apparently relevent links turned out to be not-at-all relevent, so people started ignoring the ads). He ended up speaking at Google and mentioned this, and a team got very defensive and started showing him their new advertising applications. It was basically the same annoying fully graphic ad that everyone knows and hates (and ignores). There’s also rumors of Google video ads. If this is true, it really indicates a big decline in their thinking…

    Then again, I love the new Google reader, which rivals Bloglines (not sure if it’s better just yet, I’ve only used it a few times… but still) Wow, I’ve written a lot here. I’ll stop now…

  7. kayle says:

    Really, Google effectivelyh paid $1.6 Billion for a domain name (the hardware and software and people are spare change in this deal).

  8. Ubu Roi says:

    No, they paid it for an established contributor base and name recognition. If I’m right, they’ll make all their cost + losses back within eight years or less. As Pixy said in the comments over on Mahou, if they get the cost to the consumer down to pocket change, the amount of business they’ll do will be incredible.

  9. Alan De Smet says:

    Of course, perhaps You Tube has a little secret: they’re actually modestly profitable? Robert X. Cringely’s analysis: http://www.pbs.org/cringely/pulpit/pulpit20061013.html

One Trackback

  1. […] It seems everyone and their kid sister is looking at the You Tube deal and going, “WTF? How the hell do they expect to make any money out of that?” I was scratching my head too, until the answer came to me, naturally enough, while reading a blog. In fact, this one, where Shamus poses that very question. And once it occured to me, I had to go “OMFG, it’s brilliant! Why didn’t I think of that!” (The answer is, of course, because I’m not brilliant, and I don’t have a billion and a half just lying around to do it.) […]

Leave a Reply

Comments are moderated and may not be posted immediately. Required fields are marked *

*
*

Thanks for joining the discussion. Be nice, don't post angry, and enjoy yourself. This is supposed to be fun.

You can enclose spoilers in <strike> tags like so:
<strike>Darth Vader is Luke's father!</strike>

You can make things italics like this:
Can you imagine having Darth Vader as your <i>father</i>?

You can make things bold like this:
I'm <b>very</b> glad Darth Vader isn't my father.

You can make links like this:
I'm reading about <a href="http://en.wikipedia.org/wiki/Darth_Vader">Darth Vader</a> on Wikipedia!