This is another sign of how youtube’s story of “we’ve never made a profit” is bogus. More and more organisations are advertising on youtube, youtube is pushing the limits on the amount of advertising that viewers can stand & at the same time they’ve started paying creators less.
It looks like they’ve really started abusing their market position in the last few years: more income and less expenditure. And it’s probably no coincidence that there are no financial figures for youtube alone.
Ok, what are the alternatives? A fully kitted out server rack, switches, redundancy, CPUs, multiple drives, backup storage or tapes, backup batteries, own power supply, software and licenses can cost as much as a new mid sized car?
Asking for a friend…
At the scale of one of the top websites by daily active users, owning your own infrastructure is absolutely cheaper than just throwing it on AWS. At a more realistic smaller scale where you might exceed the bandwidth available for your own hardware, there’s also the option of a hybrid setup where your content is mainly hosted on hardware that you control and then it automatically scales out to AWS or similar when demand spikes.
There’s really tons of ways to make web apps and server infrastructure cheaper than just renting it from a cloud provider, but many orgs lack the vision and drive to do so and just fork money over to [insert hyperscaler here] and watch their app go down when that hyperscaler goes down. I really question this mentality especially when the same organization has constant discussions about not liking how large their cloud provider bills are
One could argue that reduced maintenance costs are a value from the cloud providers. E.g. when my AWS VM dies I can get a new one back in <10m (faster with automation). When my self-hosted server dies I need to have planned for that with a warm spare and someone needs to physically be connecting new hardware. AWS allows you to pay more but have a predictable constant cost.
But I think that you’re right that it’s lack of vision. Everyone’s following the VC-backed company path, where it doesn’t make sense to save money for next year because we’ll be selling some entirely new company then.
I found an estimate of annual expenditures of 3.25 billion, without content payouts, but with engineering/legal/moderation costs. As 2024 revenue I found back 36 billion from advertising & 14.5 billion from subscriptions. Forbes had an article where Google claimed to have paid out $70bn in 2021-2023 to content creators, this number probably includes subscriptions. In those 3 years youtube had an ad revenue of 89.5 billion, but I have no number for subscriptions. These are all very opaque numbers. Based on these opaque numbers, I’d guesstimate youtube’s profit margin at 42%, which I find excessive.
Edit, how I got to my guesstimate of 42%:
36bn ad revenue in 2024. An average of 30bn ad revenue in the 3 years prior. Estimation for the subscription income in those 3 years: 30/36 x 14.5 x 3=36 billion. 73bn expenditures & 126bn income = 53bn profit. 53/126 = 42%.
This is another sign of how youtube’s story of “we’ve never made a profit” is bogus. More and more organisations are advertising on youtube, youtube is pushing the limits on the amount of advertising that viewers can stand & at the same time they’ve started paying creators less.
It looks like they’ve really started abusing their market position in the last few years: more income and less expenditure. And it’s probably no coincidence that there are no financial figures for youtube alone.
Someone did the math and estimated YouTube would cost $2bn in cloud costs (i.e. no creator payments) if hosted on AWS.
AWS is incredibly expensive, if you’re hosting something like GitHub or Netflix on them instead of just owning the servers, you’re incredibly dumb
Ok, what are the alternatives? A fully kitted out server rack, switches, redundancy, CPUs, multiple drives, backup storage or tapes, backup batteries, own power supply, software and licenses can cost as much as a new mid sized car? Asking for a friend…
At the scale of one of the top websites by daily active users, owning your own infrastructure is absolutely cheaper than just throwing it on AWS. At a more realistic smaller scale where you might exceed the bandwidth available for your own hardware, there’s also the option of a hybrid setup where your content is mainly hosted on hardware that you control and then it automatically scales out to AWS or similar when demand spikes.
There’s really tons of ways to make web apps and server infrastructure cheaper than just renting it from a cloud provider, but many orgs lack the vision and drive to do so and just fork money over to [insert hyperscaler here] and watch their app go down when that hyperscaler goes down. I really question this mentality especially when the same organization has constant discussions about not liking how large their cloud provider bills are
One could argue that reduced maintenance costs are a value from the cloud providers. E.g. when my AWS VM dies I can get a new one back in <10m (faster with automation). When my self-hosted server dies I need to have planned for that with a warm spare and someone needs to physically be connecting new hardware. AWS allows you to pay more but have a predictable constant cost.
But I think that you’re right that it’s lack of vision. Everyone’s following the VC-backed company path, where it doesn’t make sense to save money for next year because we’ll be selling some entirely new company then.
I found an estimate of annual expenditures of 3.25 billion, without content payouts, but with engineering/legal/moderation costs. As 2024 revenue I found back 36 billion from advertising & 14.5 billion from subscriptions. Forbes had an article where Google claimed to have paid out $70bn in 2021-2023 to content creators, this number probably includes subscriptions. In those 3 years youtube had an ad revenue of 89.5 billion, but I have no number for subscriptions. These are all very opaque numbers. Based on these opaque numbers, I’d guesstimate youtube’s profit margin at 42%, which I find excessive.
$36bn ad revenue + $14.5bn subscriptions: https://www.businessofapps.com/data/youtube-statistics/
$3.25bn annual expenditures: https://www.clrn.org/how-much-does-youtube-cost-to-run/
$70bn payed out to creators from 2021 to 2023: https://www.forbes.com.au/news/innovation/youtube-70-billion-creator-payments/
Edit, how I got to my guesstimate of 42%:
36bn ad revenue in 2024. An average of 30bn ad revenue in the 3 years prior. Estimation for the subscription income in those 3 years: 30/36 x 14.5 x 3=36 billion. 73bn expenditures & 126bn income = 53bn profit. 53/126 = 42%.