YouTube to Pull in Over $1B in Revenue in 2011, I Say Closer to $2B

YouTube to Pull in Over $1B in Revenue in 2011, I Say Closer to $2B

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Citigroup’s Mark Mahaney has predicted that YouTube will pull in over $1.1 billion in revenue this year. He comes to this conclusion by using the Myspace statistics on revenue-to-page. I don’t know that they’re the best model to use in this type of determination since they’re nowhere near as popular or pulling in as many page views as YouTube is. Additionally, Myspace is less video intensive, meaning they are probably pulling in far lower CPM numbers. But let’s take a look anyway, shall we?

First, here’s Mahaney’s table for his prediction:

The major flaw in this, to me, is the CPM he is using. If we look at some research:

  • IAB/Bain Research Digital Pricing Research 2007 – $43 CPM average
  • Tubemogul Average Video ad CPM in 2008 was $12.39
  • Razorfish Media June 2009 – Average CPM for video ads $15-20
  • Advertising Age – Yahoo! set for $3.04B ad revenue for 2010, AOL $890M, Facebook just below that and MySpace only $360M

Now, many of the ads showing at YouTube aren’t actual video ads but are instead companion and display ads. Yet they still manage a whole slew of video ads, for example I just loaded up my personal homepage and a trailer for Gulliver’s Travels showed at the top right corner. On top of that, YouTube is making all manner of other deals for content, featured videos, sponsored placements, etc.  Just in the last few months they’ve cut deals with Sundance Film Festival, HP Friday Improv, music groups and more.

In fact, straight from the YouTube Blog:

The mobile ad market is growing fast and set to surpass $1 billion in the US in 2011. We also have a new milestone to share – YouTube now exceeds 200 million views a day on mobile, a 3x increase in 2010.

Some ad videos on the site have reached massive audiences:

  • Old Spice 25M
  • Nike – Write the future – 22M
  • Tipp-Ex – Hunter shoots a Bear – 13M
  • Hell Pizza – Deliver me to Hell – 2.5M
  • Toyota – Swagger Wagon – 7.6M

From their end of year blog post about Partners (Dec 22, 2010):

During the last 12 months you all watched more than 700 billion YouTube videos, and uploaded more than 13 million hours of content to the site. …our partner program grew to around 15,000 participants worldwide…

On top of that, his CPM for YouTube is stable at $1.08 and I have to believe that it’s probably higher than that considering the demand for the content. At $1.08 for 700B views that’s about $756M. At $2 CPM that’s $1.4B in revenue, at $2.5 CPM it’s $1.75B, etc (slightly more than what Google paid for YouTube back in 2006).

I could see them easily creeping toward $2B in 2011 in regards to revenue. Net revenue on the other hand is much harder to determine. There are about 15,000 partners worldwide as of Dec. 22, 2010 but are they generating 50% of all content on YouTube? I find that hard to believe considering there were probably over 50 million users on the site. If each of them uploaded one video it would require the 15,000 partners to upload 3,334 videos each to match that. Now that logic is somewhat flawed as there is probably a large majority of users who have never uploaded a video to YouTube. If we use the 10% rule, that would be 5 million users who uploaded one video last year and that would require each of the 15,000 partners to upload 334 videos each, or roughly, one per day.

Will we ever really know how much YouTube is pulling down in revenue? Probably not. Google has no reason to give us specific numbers. They’re certainly not looking for investors and they don’t really answer to anyone but themselves and their shareholders. Still, I think they’ll pull down closer to $2B this year than $1B and you can quote me on that.


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