No. of Recommendations: 14
"YouTube Premium" subscription revenue is something like $12bn, which has essentially zero incremental COGS.
Unlike the global ad market as a whole, the video business has some room for potential growth.
Firstly it might not look like it from watching videos, but YouTube is, whilst not exclusively, largely an advertising product as far as Google is concerned. More correctly, you are the product (you are sold to businesses by Google) and the businesses buying ads are the consumer.
Advertising revenue is 71% of the YouTube business at $30B, YouTube premium at 29% at around $12B.
In 2022, YouTube's advertising revenue accounted for approximately 11.35 percent of Google's total revenue at $30B.
What about running costs? As it happens they are absolutely huge - specifically for YouTube. The business isn't as good as text search.
According to a research conducted by Entourage Marketing & Design in 2019 which used figures from Statista and Business Insider, it is estimated that Google spends an approximate $5 billion per year in running YouTube. That analysis was 4 years ago - over that time YouTube ad revenue has doubled, so as a proxy, and catering for views and quality of video also multiplicatively growing, I would say costs have also doubled from $5B (if Enterage is right) to $10B.
YouTube costs: $10B
YouTube premium: $10B
YouTube ad revenue: $30B
If this is right, YouTube premium would not even cover costs without the advertising, and also has the problem of eating into ad revenue.
When you are a premium subscriber, you no longer contribute to Ad revenue for YouTube. So ditching premium wouldn't be as bad as it sounds financially. But it is valuable for other reasons - certain people just hate ads so would otherwise leave anyway if they didn't have an option to remove them.
YouTube is a good business but very costly, so less profitable than text search.
- Manlobbi
