By Google’s (GOOG) standards, YouTube was not a terribly expensive acquisition. The search company’s market cap is about $170 billion. It paid less than 1% of that for the world’s largest video site.
But, sometimes no matter how cheap something is, the price comes too high.
According to The New York Post, "YouTube’s numbers for 2008 don’t look pretty: while 3 billion videos are viewed every month, revenues could total an anemic sub-$200 million this year ."
There are a lot of theories about why YouTube does not work as a commercial enterprise. One is that the videos are too short. Another one is that they are too hard to search and put into categories.
But, none of those get to the heart of the problem. The quality of most of the clips is simply too poor for major advertisers to find compelling.
Who wants to put an ad that took $5 million to product next to a video made from a cellphone, no matter how many people watch it? A hard sell for companies used to seeing their ads on HD TV
Douglas A. McIntyre
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