Online research firm comScore reports that more than 172 million Americans watched video online last month. Industry experts are not certain whether any of the largest providers of these videos make money, but there is a reasonable chance that none do
Google’s (NASDAQ: GOOG) may always have the largest video site–YouTube. The search company said that YouTube had doubled its revenue in the last reported quarter. The site remains made up of mostly amateur clips done at poor resolutions. It is an environment poorly suited for premium pay per view or advertising supported content. User created video content will always dominate the site particularly because people can post video content for free. It is nearly impossible that YouTube will ever be a large profit center for Google. YouTube had 144 million unique visitors last month. Those people watched 2 billion videos, a figure which indicates how much idle time people have and how poorly they fill it.
The large portal and entertainment sites have tens of millions of visitors who watch video each month. Most of this is premium content. Many carry video ads with them, but the portals do not publicize profits from this business. It may be that there are not enough ads connected to the content or the CPMs are low. AOL (NYSE: AOL), Yahoo! (NASDAQ: YHOO), and Facebook probably make very little from their video ad businesses at least in comparison to their total revenue.
The largest experiment in online video revenue is Hulu. Its total number of unique visitors is 24.5 million. These visitors watched more than 131 million videos last month. Hulu wants to have an IPO, but has not done so. Its advertising supported business is not large enough to fuel rapid growth. Hulu would promote the fact if it were. Hulu has experimented with charging users for video content. It has remained silent about the results, so it is unlikely that they are promising.
Video streaming has become a battle ground between content companies and internet service providers. Video files take up a lot of space and compromise the speeds at which TV and cable companies can operate their “pipes” efficiently. The margins at the service providers seem to have been damaged by the need and expense to make those pipes larger.
It may be that no one–content providers, portals, or carriers–is making a dime from online video.
Douglas A. McIntyre
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