As financial forecasts go, it wasn’t delivered with the sort of ringing conviction you might like.
But today, for the first time, Google’s CEO disclosed that he was expecting YouTube to make it into the black some time in 2010.
If he’s right, it will be a significant turning point, and bring vindication for one of the most controversial internet acquisitions ever mounted.
It came in a brief conversation I had with Eric Schmidt after the analyst call to discuss Google’s latest earnings.
Given very positive comments on the call about the pick-up in advertising YouTube had seen in the fourth quarter, I asked him whether that meant it would finally turn a profit before the end of the year.
His understated response: “I’d assume so, yes.”
That would be a big moment. Remember, it is less than a year since a Credit Suisse report made the rounds projecting that YouTube would generate revenues of just $240m on a cost base of $711m in 2009.
This was how Schmidt explained the turnaround: “We’ve figured it out. Nowadays, just about every advertising campaign involves YouTube as part of the solution. That’s a big deal.”
On the earnings call, Google executives claimed that the video site best known for cats peeing in toilets had now won a place in most mainstream consumer goods campaigns. Patrick Pichette, chief financial officer, said that advertising space on YouTube’s home page had “nearly sold out” in the fourth quarter, and the site is now selling advertising in 20 countries around the world.
Google is still locked in a dispute with Viacom over claims of rampant copyright abuse on YouTube. It is still restricted to attaching advertising only to videos that are covered by a partnership content deal. But as a first step, making it out of the red would be significant.
