Those of you who don’t use AdBlock or prefer to watch YouTube videos on a mobile app are probably familiar with how much the service loves to bombard your with advertisements. You would think that the people running YouTube are rolling in cash but, according to a new report, the service is actually struggling to become a profitable business. Although it was able to pull in a few billion in revenue last year, it barely managed to break even after content an equipment costs were accounted for.
Google Inc. nurtured YouTube into a cultural phenomenon, attracting more than one billion users each month. Still, YouTube hasn’t become a profitable business. The online-video unit posted revenue of about $4 billion in 2014, up from $3 billion a year earlier, according to two people familiar with its financials, as advertiser-friendly moves enticed some big brands to spend more. But while YouTube accounted for about 6% of Google’s overall sales last year, it didn’t contribute to earnings. After paying for content, and the equipment to deliver speedy videos, YouTube’s bottom line is “roughly break-even,” according to a person with knowledge of the figure. By comparison, Facebook Inc. generated more than $12 billion in revenue, and nearly $3 billion in profit, from its 1.3 billion users last year. The results reflect YouTube’s struggles to expand its core audience beyond teens and tweens. Most YouTube users treat the site as a video repository to be accessed from links or embedded video players posted elsewhere, rather than visiting YouTube.com daily. Google executives want them to turn on YouTube the way they turn on television, as a habit, where they can expect to find different “channels” of entertainment.