Google will rue the day it bought YouTube

Thursday, July 3rd, 2008

Google’s motto may be “do no evil”, but the company can do no wrong in the eyes of tech investors and the mainsteam media. However, I suspect the day it decided to lavish some of its pocket money on YouTube may prove to be one of the biggest mistakes the company ever makes.

The $1.65 billion it paid for YouTube may be small beans to the search monolith, but Google has publicly admitted that it can’t find a way to turn a profit from the millions of eyeballs that are watching video on its site every day. Hosting terabyte upon terabyte of video doesn’t come cheaply. Charging users to watch videos is a non-starter, so either Google finds a way to make YouTube more attractive to advertisers, or it’s going to continue to bleed money.

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