Charbax.com

I like to speculate on Youtube’s potential for profits and revenues on my blog in those previous posts: http://charbax.com/2009/04/09/what-google-pays-for-youtube/ , http://charbax.com/2008/08/14/current-global-youtube-bandwidth-might-be-126-petabytes-per-month/ , http://charbax.com/2008/08/07/google-should-activate-overlay-youtube-ads-now/ , http://charbax.com/2008/06/28/youtube-needs-to-change/ , http://charbax.com/2008/04/30/when-google-starts-to-revolutionize-youtube-using-overlay-advertising/ and http://charbax.com/2008/01/09/i-just-interviewed-the-youtube-founders/

Today Youtube announces officially that they are serving more than 1 Billion video views per day. So here are my latest calculations posted to: http://www.techcrunch.com/2009/10/09/youtubes-new-logo-shouts-from-the-rooftops-1-billion-views-per-day/#comment-3027990

Let’s calculate:

1 Billion views per day, if average 30 seconds per view, if average is 300kbit/s video bitrate = That’s “only” 1125 Terrabytes of video streaming bandwidth per day.

Let’s guess Google pays $0.01 per GB of bandwidth (because they own most of their bandwidth infrastructure caching all videos as close to viewers as possible). That would mean that Google would be paying only $11250 in bandwidth per day.

If average Youtube video view is 1 minute, that would still only cost $22500 per day at $0.01 per GB.

If Google pays as much as $0.05 per GB, and average video length is 1min and average bitrate is 300kbit/s, that’s still “only” $112500 per day to host the worlds biggest video site reaching hundreds of millions of viewers all over the world.

Now let’s consider Google may be “only” monetizing 20% of those views at a rate of “only” $10 per 1000 views with overlay advertising in partner/copyrighted/claimed videos:

If 20% of Youtube videos are monetized at $10CPM, that’s $2 Million in revenues for Google per day, for 200 million overlay and other ad impressions per day.

Overall, according to my calculations, Google may be spending between $8.2 Million and $41 Million per year on bandwidth to deliver all those video views.

And according to my calculation and speculation, if 20% of video views are monetized by overlay and other ads, Google could be making upwards $730 Million in revenues per year.

$730 Million -  $41 Million = $689 Million in profits for Google on Youtube each year. Of which they split about half to the content providers.

Youtube could still be a very huge source of profits and revenues for Google, and my calculations are probably much lower than Google’s really potential for monetization with this.

I believe even user generated content can be monetized, more and more advertisers only care if they can sell stuff to the viewers through those overlay ads.

I also posted this comment on the official Youtube blog: http://youtube-global.blogspot.com/2009/10/y000000000utube.html?showComment=1255103825750#c9092045352321286663

3 years, why can I still not even apply to become a Youtube partner just because I am not a resident of USA, UK, Germany, France, Japan, Spain, Canada, Australia? How about the hobbyists of the 200 other countries of the world, are they not allowed to turn their hobbies into a real business?

All this time, still no real way to sell things with Google Checkout or whatever directly from within the videos. Still no automatic subtitles generation and automatically translated subtitles in all languages. Still no regular video-downloading support! No Micro-payments for monetization of really high quality streaming and downloading!

The video recommendations algorithms still suck. No really good platforms to watch Youtube on a set-top-box. No desktop uploader with resume and maximum upload bandwidth features, no way to access ones originally uploaded videos!

3 years, still no way to re-upload better quality of videos, still no easy way for regular people to claim ownership of video and audio content when other users pirate your content. Still no way to edit out the music of a video with your own alternative legal music.

3 years, still no alternative to the crappy Flash format!

OK, I appreciate that the bandwidth that Youtube provides for 1 billion daily views is absolutely amazing work in terms of bandwidth management and hosting. Though seriously, you got 1.65 Billion dollars for it, Google has the best PHD engineers in the world, you are a lot of developpers who should be able to improve things even faster at Youtube. Seriously, get to work now and release these features! You actually have the responsability to make these features work now.

Here’s a follow-up to my previous post at Current global Youtube bandwidth might be 126 petabytes per month that I posted as a comment here:

Let me do a quick calculation on the actual expense for Google per 1000 views:

Standard Youtube quality is at 320×180 - 350kbit/s Sorenson - 25fps - 22hz mono audio thus consumes about 8 Megabytes of bandwidth for a 3 minute clip. Guessing that the average Youtube view measured (75 Billion views per year according to Credit Suisse) watches a 3 minute clip.

75 Billion times 8 Megabytes = approximately 590625000 Gigabytes of bandwidth consumed by Google for Youtube per year. = Approximately 590 thousand Terrabytes of bandwidth per year.

Let’s assume Google has brought the cost down per Gigabyte towards $0.05, assuming that since Google is the largest single user of bandwidth in the world with Youtube, that they do get discounts on bandwidth pricing by the content delivery networks and since Google owns and builds many of the fiber optic lines and nodes themselves to including builds the server parks as close to all viewers as possible.

590 Thousand Terrabytes per year times $0.05/GB only amounts to a cost for Google of $29.531.250 dollars to host Youtube each year at this point.

I surely think that below $30 Million for hosting Youtube each year, that is pretty manageable.

Surely my estimate of total cost at $0.05 might be low considering you add other Cloud Computing costs to just Bandwidth, such as storage, encoding capacity and processing power to process each request fast.

If you consider Google would pay $0.10 per GB delivered, and that the average Youtube view instead is 6 minutes in length (in my opinion very unlikely, a Youtube view average length probably is closer to 1 minute, since people skip stuff they don’t really like), then Google would still only have an expense per year for Youtube of below $120 Million per year for delivering those 75 Billion views per year.

Now consider a certain % of Youtube views now are in High Quality mode which uses 480×270 - 1mbit/s Sorenson - 25fps - 44hz stereo mp3 audio and even that more and more of the views are in the Youtube HD format 1280×720 - 2mbit/s H264 - full framerate - 44hz stereo 254kbit/s AAC audio, I still think those HQ and HD formats are only a small % of all Youtube views since most people don’t bother clicking to get HQ and HD quality when viewing and that HQ requires 1mbit/s+ download speed and HD required 2mbit/s+ download speed and a fast computer to decode 720p H264 Flash content.

So my guess is that Google definitely keeps Youtube expenses below $100 Million all included so far, and my estimate is that Google could quickly be making MANY Billions of dollars in revenue from Youtube as soon as Google decides to flip the monetization switch. Which basically means to allow all Youtube content providers to activate overlay advertising on all their videos, which will include referals for 1-click sales including digital content sales and shipped products (for example 1-click Amazon buy), including integrated sales of merchandizing and much much more. Youtube hasn’t even integrated very much full length full quality commercially produced contents such as being a Hulu and all-in-one VOD provider.

Anyways, in my points Youtube will quickly become Google’s biggest source of revenues and profits, and I think it probably is the biggest part of Google’s future and I actually think the growth of Youtube view-counts and bandwidth usage is only at the very early stages and that we are soon going to be talking about thousand and millions of times more views and bandwidth usage once all people transfer their 5-hour daily TV watching to be source from Youtube through set-top-boxes and other ways to watch Youtube on the TV and on mobile devices.

If Google had to get a CPM on ALL videos today to cover their bandwidth and service costs, in my estimation that CPM would be: $1.33 CPM. That would be a CPM very easy for Google to exceed even by only monetizing a fraction of all the views. A $15 CPM is very likely achievable by Google with good overlay advertising, thus Google would only have to monetize less than 10% of all the views with overlay advertising to make a profit.

That is based on my estimate that Google covers mosts bandwidth/storage/ cloud computing expenses at below $100 million per year for 75 Billion views.

I see no reason why Google would be paying more than $0.10 per Gigabyte transfered for normal Youtube views. And I think that most of those most popular Youtube views are for short standard quality video files.

Google’s CEO Eric Schmidt just said Google is delivering 1.3 million minutes of videos on youtube every minute. Source is the second video on this page: http://cnbc.com/id/26182232

Which basically means Youtube has a constant bandwidth output average of 390 gbit/s if you consider each Youtube stream is at 300kbit/s and that more and more of the streams are in “high quality mode” which uses a bit more bandwidth and some of Youtube’s videos are delivered in H264 to devices like the iphone, Tivo, Apple TV and stuff like that.

So my estimates were way low.

That 1.3 million number basically means Youtube constantly has the equivalent of 1.3 million viewers. Which might be low compared to any big established TV station, but it’s huge considering the Youtube infrastructure provides a different customized on-demand stream to every user.

Let’s guess that the average Youtube view is something like 3 minutes long. Divide 24 hours by 3 minutes, you’ve got 480 times 1.3 million views on Youtube in average per day. That amounts to a current average of 624 million views on youtube per day. When Google acquired Youtube, there was about 100 million views on Youtube per day, so if the numbers are true, Google might have increased Youtube’s bandwidth by more then 6 times since they acquired Youtube about two years ago.

One source said average Youtube user watches something like 40 videos on Youtube per month.

So if that statistic of 40 views per user average per month is true, Youtube would have 468 million different users watching over 18 billion videos on Youtube each month. Which would mean each Youtube user watches in average 2 hours of videos on Youtube each month, which still would be low compared to the average 90 hours that the average person in USA watches TV each month (3 hours in average per American per day).

A constant 390gbit/s average bandwidth stream from Youtube would mean that Youtube uses 126 petabytes of bandwidth each month.

If Google is paying as much as $0.10 in average per GB delivered, they are probably paying less then that, but let’s say the worldwide average may be $0.10 per GB, considering there are lots of storage and networking equipment that they have to constantly add to their big Youtube server farms, then at 126 petabytes per month, Youtube’s bandwidth costs might be around 10 million dollars per month right now.

If you consider Internet Video-On-Demand might replace traditionnal TV at some point, Youtube might still have a potential to expand by a hundred times when that transition happens. And all the while people will require the videos to be delivered in HD quality directly onto people’s HDTVs using a Video-On-Demand set-top-box which will consume 10 times as much bandwidth with at least 3.5mbit/s per 720p HD quality video stream. So potentially Youtube’s bandwidth consumption could increase by 1000 times during that transition.

I don’t think this is difficult for Google to figure out. They should just allow any Youtube publisher to activate overlay advertising on all of their videos.

Google has voice recognition, they have annotations, invideo comments are comming up. They have comments, they should have some more and better usergenerated tagging, ratings and personal recommendations.

From there, while they re-encode all the videos to more and better formats, they can stream out the advertising features as a stream parallel to the video streams, which devices can then overlay on the video in all kinds of different ways.

Really the only perhaps difficulty Google might have with overlay ads, is that it might not be compatible with the current Youtube Flash version standard which is Flash 7.

Once Google activated overlay advertising, video makers are going to be making a living doing this. If you have more then 100 thousand viewers per month on your Youtube videos, you could be making a living doing it. And Google is going to be making billions of dollars each quarter on this. I expect Youtube to become Google’s biggest revenue source pretty soon. There is nothing better on the Internet then video.

I posted this as a comment at http://bits.blogs.nytimes.com/2008/08/06/google-goes-gaudy-with-youtube-ads/#comment-278139

Chad Hurley says they have automatic DMCA systems, or user-generated automatic moderation. Does that mean they have analog and digital fingerprinting filters on uploaded content? Do they provide content owners to scan their content and submit those analog and digital fingerprints? Does Youtube let content owners automatically “take-over” the content onto their own Youtube account when someone else uploads it?

The worst thing I think with regards to content owners being still legitimally angry at Youtube, is that Youtube still doesn’t monetize the views as it should, so all these billions of views of copyrighted material isn’t directly monetized, basically it’s bad for content owners and bad for Youtube as well in terms of paying for bandwidth and infrastructure. Although some say content owners can monetize their content indirectly (stuff like when people watch your music video or your concert video on Youtube, more people buy your CD) and some people say it doesn’t matter that Google is loosing millions of dollars on paying for the bandwidth and infrastructure required to deliver 40 thousand terrabytes of bandwidth per month currently, including the infrastructure required to encoding of 1000 minutes of video every minute, host it and process it in different ways.

I didn’t like Flash based videos when Youtube started, I still don’t like it. But the popularity and ease of use of the Youtube experience is impressive. Still though, I think it’s much too hard to really get meaningful experiences on Youtube, the personalized video recommendations engine isn’t very good so far, the quality is still so low and the incentive from content producers is still very limited cause the monetization is not very effective.

Google is the coolest company out there, but I think they are still too slow at releasing new features. It’s been over a year and a half since Google aquired Youtube, and still nothing much seem to have happened other then perhaps that there is a better more reliable infrastructure behind it, view count and audience is growing, fancy statistics for the content providers, that’s still no difference from the users point of view and especially I would say it could be said to be disappointing from the content providers point of view.

Chad Hurley says he is proud that there are some college kids that are earning thousands of dollars each month posting videos to Youtube, that some people get record contracts or get hired on TV because of being discovered on Youtube. That’s all fine and well, I wouldn’t have the exact monetization statistics, but I don’t think there are more then a few tens perhaps a few hundreds of independent content providers that are able to make money on Youtube thus far. Monetization of Youtube with banner ads next to the video is not much better then traditional adsense, you need millions of hits to start making a few hundreds dollars a month. Once Youtube has activated automatic overlay advertising, the monetization rates should grow 10x or 100x in terms of monetization per 1000 views. This will lead to tens of thousands of college kids being able to make a living being creative with their video publishing on Youtube. So really, Youtube needs to increase the impact from monetization 1000 times.

I posted this as a comment at newteevee.com

Once they activate it, I think it can probably use voice recognition to synchronize overlay advertising with the words said in the video. “When somebody says Coca-Cola in the video, there might be a Coca-Cola ad popping up at the bottom of the ad”.

I think this could be so insanely huge it will revolutionize the whole entertainment industry. Finally it will be possible to make a living putting videos on the Internet. As much as $10 or $15 per 1000 views on the videos should be what Google would be paying any content creator who ties up their Youtube account with their Adsense account and who activates the Overlay advertising on all their videos. No Youtube content creator would be forced to activate the ads, but if the content creator wants to earn money they would be able to flip a switch and start displaying ads on all of their uploaded videos.

So I was saying, this will revolutionize the entertainment and blogging industry cause it would be relatively easy for video-bloggers to then improve the quality of their video productions to get higher audiences. When artists and citizen journalists finally get paid even just a little for their effort, they will be able to do this full time. Walk around with Youtube connected cell phones and still concentrate uploading a lot more quality content then they were uploading back when uploading videos on Youtube was something the independent content producers only did in their free time as a hobby.

I think Google are probably fine-tuning the overlay advertising feature to have it totally ready for when they launch it big time for any content provider on Youtube to be able to start making serious money. Income per 1000 views on Youtube overlay ads are perhaps as much as 100 times higher compared to textual ads using Adsense on for example blogs.

A plugin to watch all the videos from my http://techvideoblog.com directly on your HDTV or standard definition TV, with the remote control is available here:

http://labs.divx.com/node/1320

I think that the DivX Connected set-top-box standard is the beginning of the mass media revolution. Soon the box will cost below $100, currently it is available for £130 at Amazon UK: http://www.amazon.co.uk/D-Link-DSM-330-Connected-Wireless-Player/dp/B000X4F7RO.

Currently the DivX Connected hardware requires a Windows based computer on your local network to function, it uses a Windows software to stream content from the Internet to your TV using HDMI on a HDTV or using composite, scart and component connections. But there is probably a next version of DivX Connected hardware in the planning that would also provide the option to work without the need to have a desktop or laptop computer in the home, which I think is crucial to reach mass market penetration, to reach and change media consumption for consumers who aren’t using broadband Internet much to watch videos yet.

You can watch my Interview with the DivX Connected products manager Dan Salmonsen demonstrating the technology at IFA 2007: http://techvideoblog.com/ifa/divx-connected/

I just asked two questions to billionnaire Youtube founders Chad Hurley and Steve Chen through Robert Scoble’s Nokia N95 when he was taking in questions from the live audience broadcasting live video using http://qik.com.

I asked them the questions “When are people going to be able to make money on Youtube” and “When is Youtube going to be in HD”.

Watch more awesome live CES 2008 video coverage at http://www.mogulus.com/podtech_ces_live http://www.qik.com/scobleizer and some of the clips are stored at http://podtechceslive.blip.tv/

I think that TV stations are going to be replaced by Internet TV next year, cause there will be $100 VOD set-top-boxes available to bring On-Demand Internet video to the HDTV. People also spend a lot of time in public transportation, there you can use a 4″ screen to watch your personalised Internet video content.

Soon enough, I don’t think that content providers will need to spend the time to create a brand, and I think RSS will be replaced by somekind of personal recommendations engine. The point is, you may “subscribe” to your favorite content providers on the Internet, but I think that even more important will be the possibillity of a generator to provide you with a personalised feed based on Ratings that you do compared to all the ratings from the community.

Today starring items on Google Reader I think is kind of useless, and I think Google Reader should have something better than only bringing friends feeds in. It should bring in feeds from all other Google Reader users based on the starring of content.

Then imagine you will be able to sit back at your 60″ HDTV and click a big green button on the remote control, which will launch a customized tv programme that the system knows you will enjoy, or you may just choose one of the “moods” of the content, such as if you are in the mood to watch something to do with Tech you can click the green button in that mode, or if you want something about politics in a certain region you can also get to view that, personalised for you.

I don’t think that people want to watch ads on the Internet, I think many people will prefer to pay 0.01$ or whatever to cover bandwidth costs and to pay the content provider. I’d rather pay Google $2 a year to not have them show me ads on search and in my gmail account, who would prefer to have to watch all those ads?

I posted this at http://scobleizer.com/2007/12/24/the-future-of-tv-at-leweb3/#comment-1786294

I think that the big studios in all categories of media know that their days of controlling media are counted. With such disruptive platforms as Youtube, BitTorrent, DivX, $200 HD camcorders, Miro, Video-blogging, it’s just a matter of time before the cool writers and composers get directly together with the cool performers and producers and decide to release the shows directly to the viewers without any need of big media moguls interfeering and taking the largest part of the revenue and destroying a lot of the creativity in the process.

$100 video-on-demand set-top-boxes, cheap, open and unrestricted portable media players (700mhz, WiFi, WiMax and HSDPA) and other open on-demand Internet access hardware will make it completely user-friendly for everyone to get those independant shows delivered instantly over the Internet from the show creators themselves.

In France once the parliamentarians suggested to pay the artists through taxes, such a thing as a $5 tax on average per citizen was suggested, which could fund much more than what all artists combined are paid today. Thus providing a system for many more talents to express themselves and create even higher quality content with complete creative freedom.

The quality and popularity of the shows being measured very precisely through the Internet connected on-demand system and through social networking tools and some popularity and quality measurement tools provided by the state which also neutrally redistributes the culture tax money directly to all the artists who deserve it.

Anyways, it’s not I guess useful to think about this right now, cause all those shows have to stay on media giant tv channel networks for now, but I would guess everyone should prepare themselves for this probable media revolution coming up. Especially a new administration such as when Al Gore “invented the Internet”, probably could set the reform agenda on the table which would take away the control on the media from the established studios (that is, unless all the candidates are corrupt or media conservatives).

Image source: http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne

I posted this at the Writers Guild of America forum: http://www.fans4writers.com/forum/index.php?topic=810.msg9036#msg9036