YouTube, once hailed as the “advertising medium of the future,” is having trouble fulfilling its promises of profit. While one of the most popular and influential sites on the internet, it is failing to make money for its parent company, Google [GOOG]. With 82 million unique viewers a month, and a large, if slippery, demographic, YouTube should be a huge money maker. But Google, who aquired the video sharing web site in 2006 for $1.65 billion, is finding that what it wound up with might indeed be a giant money sink. Don Reisinger of CNET believes Google’s buyout of YouTube was a “major blunder” that has “failed miserably.” Example: YouTube sends 300 billion GBs of data each month; bandwidth for that has been estimated to cost a million dollars a


Google has yet to develop a successful strategy to recoup significant costs like these, for numerous reasons. Only a small percentage of YouTube’s video is marketable, as its amateur-created videos do not appeal to potential advertisers. Videos cannot be regulated, content can’t be controlled, and the demographic is hard to target. There are also concerns among potential advertisers about copyright infringement as well; Viacom [VIA]’s pending case against Google for copyright infringement leaves YouTube’s future uncertain, as it could turn into a post-Metallica Napster or something resembling the non-profit Internet website

Proposed solutions include pre- or post-roll advertising (adverts that run before or after videos), or having video creators sell their own adds. There are potential problems: many people find pre-roll advertising to be annoying (it’s nice when you can skip it, but how effective is that?). And as for having content creators do their own advertising: isn’t that sort of what they’re already doing when posting videos?

By Mark Alvarez