It seems that YouTube is getting close to capturing $1 in $10 global TV advertising revenues as Alphabet yesterday broke out its ad sales for the video service for the first time. (The global TV ad market is estimated at $180m pa, YT took $15m).
For most broadcasters the major cost of attracting advertising dollars is producing content, but for YouTube, who invest paltry amounts in original content, the cost is against technology.
The cost of ingesting, hosting and serving 500 new hours of content per minute is considerable (for the record I’d put the cost at around $500m pa for the tech alone if sunk costs are factored in), but the margins are still tremendously better than the content production model.
I reckon that YouTube is on course to make three times the gross profit of services like Netflix, albeit offering a very different service.
And as subscription and streaming services eschew advertising, the value of YouTube ad slots actually go up: there is an incressing paucity of places for TV ad dollars to go.