Ever since Google bought YouTube for $1.7 billion, a crowd of armchair analysts have cackled smugly about how colossally stupid this was.
$1.7 billion for THAT?
YouTube is losing money! YouTube is going to be crushed by copyright litigation! YouTube is doomed!
Yesterday, Google announced that YouTube is finally growing nicely and will soon be profitable. So where are the YouTube bears now?
The YouTube news, by the way, was no small news for Google. The company has been desperately searching for another growth engine for the past three years, and YouTube is a big enough opportunity that it might actually help a bit.
No, YouTube won’t be as profitable as search ads (nothing will). No, YouTube won’t suddenly drive Google’s stock right back to $750 again. But a healthy, rapidly growing YouTube could eventually be a huge business. And in a year or two, it could even begin to contribute materially to Google’s top line.
What do we mean?
Some analysts estimate that YouTube will do about $500 million in revenue this year. Given the size of the global platform, and the fact that Google now appears willing to use pre-roll ads, it’s not hard to see $500 million growing to $1-$2 billion within a couple of years. And there would be a lot more where that came from.
Right now, Google is almost a $25 billion business. If YouTube grew to $2.5 billion of revenue, this would make it 10% of Google’s current size. This growth would add a few points of growth to Google’s revenue line, and it might add several hundred million to the bottom line.
Again, this would not be enough to restore Google to rapid growth, and it would certainly not be enough for YouTube to be the “Office” to the Search and AdSense “Windows.”
But it would be meaningful.
And more importantly, for those who have never stopped guffawing about Google’s obvious stupidity in buying a company with no business model, it would finally be the end of the argument.
Business Insider Emails & Alerts
Site highlights each day to your inbox.