14 DAY TRIAL // YouTube has been losing money since it was first introduced and while it is one of the biggest destinations on the web Google has so far failed to make it profitable. A new report however suggests that the video sharing site may be losing a lot less money than previously estimated. RampRate, a company that advises on bandwidth and other costs related to the IT industry, has released new data that would indicate YouTube may be losing only about $174 million yearly.
The new research contradicts previous reports that put YouTube losses at the considerably bigger sum of around $470 million. The huge difference comes mostly from a much smaller bandwidth bill as RampRate estimates that the company spends only $49 million on delivering and receiving the videos compared to the $360 million put forward by the previous Credit Suisse report. The discrepancies in the two numbers are credited by RampRate to peering, the practice between Internet networks to exchange traffic without charging each other.
“If you have significant traffic to/from another specific network, you and the other network can both save Internet Transit costs by exchanging traffic locally, i.e. peering. Of course an enormous amount of your traffic is directed to Google. If you have a presence in any data center where Google has a presence, you would love to peer with Google, as that saves an enormous amount on your payments for upstream Internet Transit,” wrote Brough Turner, founder and chief technology officer at Ashtonbrooke and chief strategy officer at Dialogic, explaining the process.
The report also shows differences in other costs, like storage and data centers, with the RampRate numbers being lower than previous ones. YouTube is losing money nonetheless but that may not actually be a bad thing according to the consultancy firm as, in the grand scheme, Google may still be profiting from its video sharing service.
“YouTube lowers the cost of infrastructure for all other Google properties. As discussed in the Telco 2.0 blog six months before the Credit Suisse report was published, YouTube is essential to giving Google significant leverage in peering negotiations,” the report reads.