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Since paying $1.65 billion for YouTube three years ago, Google (NASDAQ: GOOG) has made progress. No doubt, the site is a dominant player in video -- especially for user-generated content. And Google is enhancing the platform, such as with better ad formats, as well as distribution partnerships with companies like Disney (NYSE: DIS).
However, investors want to know when the site will start to make profits.
YouTube is certainly trying hard. In fact, this week the site announced that it has expanded its revenue-sharing program. Based on a variety of factors -- like the number of views and compliance with the terms of service -- YouTube will give a cut to the video producer. Keep in mind that the program was originally only for large operators.
No doubt, this new approach will be an incentive to get users to pump up traffic as well as crank out new videos.
So, will this work? Well, to get some perspective on on this, I recently talked to Suranga Chandratillake, who is the founder and CEO of Blinkx (a top video operator): "People like professional content. Advertisers like it too. While YouTube has a strong brand for amateur content, this may make it disadvantage when moving into professional content."
Simply put, the owners of professional content will not make it easy for YouTube to create profitable deals. Just look at Hulu.com, which is a joint venture of News Corp. and NBC Universal. The site has generated lots of growth primarily because of its access to top-quality content.
In other words, despite its enormous traffic, it could be difficult for YouTube to become a Google-like moneymaker.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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