Google Inc.'s acquisition of YouTube in 2006 represented a $1.65 billion investment in the video-sharing site but internal earnings reports demonstrate that the purchase has yet to yield substantial revenue. Standard text-based advertising that is employed by the Google search engine has shown to be monetarily unsuccessful on YouTube.
To amend this, Schmidt stated that YouTube will be introducing new products on the website that go beyond the traditional text-based
advertisements that can be seen around the actual video. He went on to say that "Google believes that advertising itself has value. The ads literally are valuable to consumers. Not just to the advertisers, but the consumers." (Source: news.com)The operational costs involved in running and maintaining the video-sharing site require millions of dollars worth of bandwidth. As of now, YouTube is providing millions of users a free service to both upload and view videos. An astounding 10 hours of new content is added every minute. (Source: news.com)
Google Inc.'s continued failure to make YouTube a profitable enterprise will eventually affect the company's bottom-line; thus Schmidt's aggressive strategy is not all too surprising. News of Schmidt's statement sent Google's shares up 4.7% to $584.86, however shares for the company are still in the red for the year. (Source: reuters.com)
Schmidt also confirmed that Google Inc. is in negotiation with Yahoo! for a business deal that would see Google ads appear on Yahoo!'s search results, which would allow Yahoo! to commit its resources in developing alternative means of generating advertisement revenue, though he declined to elaborate on the details of such a partnership.
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