Could YouTube Become as Big as CBS or Viacom?

Google’s video site could top $15 billion in revenue in next five years, Wall Street analyst says

Within the next five years, Google’s YouTube could generate $15 billion or more in annual revenue — which would make it about the same size as CBS or Viacom, a Wall Street analyst predicts.

“We think the odds are extremely high that YouTube will be a large, profitable and highly consequential business” in the next few years, Sanford Bernstein senior analyst Carlos Kirjner wrote in a research note Friday. “It is becoming an attractive and important medium for brand advertisers, and we think it will increasingly compete (with traditional media companies) for the incremental video-delivered brand advertising dollars.”

The vidsite now streams 6 billion hours of video to more than 1 billion unique users per month across the globe. In the U.S., YouTube now reaches a bigger audience of adults 18-34 than any single TV network, global head of content Robert Kyncl said at Google’s YouTube Brandcast event this week, citing Nielsen analysis.

Google does not break out results for YouTube in its financial statements. In 2012, the website was expected to haul in net revenue of $2.4 billion, according to an estimate last year by analyst Mark Mahaney, who previously was with Citigroup and joined RBC Capital Markets earlier this year.

YouTube is strategically crucial for Google to maintain growth, as core search revenue decelerates over the next few years, according to Kirjner.

This spring, YouTube is expected to launch a handful of subscription-based channels from premium content providers. That could represent another important revenue stream, in addition to YouTube’s ad sales. Site already offers pay-per-view streaming movies and TV shows from major studios and nets, though it’s not clear how significant that business is.

As far as ad-supported professionally produced content, YouTube appears to have shifted gears after fronting a $200 million investment in original channels starting in 2011. At Wednesday’s NewFronts event, Kyncl said YouTube has moved away from “these waves of announcements” on original channel partners. “Now it’s simply about finding the right talent and content,” he said.

Beyond YouTube, Google has embarked on initiatives including Google Fiber, self-driving cars and wearable Google Glass devices in an attempt to build new businesses that will fuel growth.

Google Fiber, which provides ultra-fast Internet and TV, is currently live in Kansas City metro area and the company has announced plans to bring fiber service to Austin, Texas, and Provo, Utah. On Thursday, the city council of Shawnee, Kan., a suburb of Kansas City, voted to approve a franchise for Google Fiber.

“We believe it is perfectly possible that Google achieve an attractive IRR (internal rate of return) for its Fiber deployment,” Kirjner wrote. “If that is the case, it could be passing several million U.S. homes in a few years and may be even expanding overseas.”

Kirjner previously expressed doubts that Google will be able to achieve favorable economic returns on a widespread fiber-to-the-home expansion. If Internet giant hits pay dirt with fiber, self-driving cars, Google Glass or other nascent projects, “those who call such initiatives ridiculous or a waste will feel very much like those who said the same of the YouTube acquisition not that long ago,” he wrote in the note Friday.

Sanford Bernstein analyst has an “outperform” rating on Google, with a target price of $1,000 per share (compared with $829.61 per share May 2 closing price).

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  1. Mary says:

    I can appreciate how innovative Google is with all of the new technological advancements. Some things they develop and release seem remarkable and highly useful but some items they are developing just seem to be a marketing ploy, like the Google car. Either way, it gets people to talk about it just as I am doing now.

  2. Adam says:

    Oh, and Justin Bieber, as much as I hate to say it, started off as a YouTuber.

  3. Adam says:

    The thing is, people are watching and getting more into the Amateur video production and actually liking it if not more than the top quality budgeted ones. I know I speak for hundreds of thousands (if not millions really) that just love watching Amateur game walkthrough/playthroughs with improvised humor. Look at PewDiePie (biggest youtuber) and Tobuscus (just as funny really), the list goes on. As far as quality, there are actually some top quality video producing companies within the YouTube community, look at MakerStudios. These guys provide the TV styled effects and production, with the independent content. On top of that, they have Interactive style films on YouTube, where you chose the outcome. Try getting that on CBS and Viacom (press the red button now haha)

    I guess that rambling means that the Indie side of all these industries are getting far bigger than ever, we don’t rely on the big TV & Film Industry / Game Industry / Music Industry / to provide us with content. (for example, the indie game, Minecraft. Would never of gotten as famous and renowned without YouTube, the musician Megan Tonjes, wouldn’t of gotten as famous without YouTube)

    YouTube is giving us all of that and more. On top of that, giving everyone a place to throw their voice to the masses and get heard.

  4. TechFan says:

    While YouTube will no doubt become more and more popular, it’s still mostly an amateur video production outlet. Just a couple of days ago, Verizon dropped it as a widget for its TV service, meaning YouTube streaming video can’t be directed by Verizon subscribers through their computers to their TV sets. The technology really didn’t work very well, as there was often an irritating time delay between the audio and video. It’s ironic as TV sizes get larger and larger, there’s such an interest in devices that are smaller and smaller. I’m not interested in watching TV shows and movies on tinier screens. I love the advances made every day in tech but as a consumer, video sources like YouTube are going to have to become more accessible to the home big screen and work correctly before I can seriously get interested in them.

  5. Joe Mogir says:

    I call bullsh*t on that $2.4 billion number – no way it’s that high. This notion of YouTube challenging a broadcast network is hype to the extreme. The fact that it has as many views as a channel doesn’t matter – most of those views are on shyte content that no advertiser wants to buy. YouTube has a future, but it’s a long way from $15B in ad revenue.

  6. Tony J says:

    I think the real question is “Will CBS or Viacom be as Big as YouTube?”. It’s unlikely that people will tolerate anything but VoD(Video on Demand) In 5 years. The overarching question is will CBS or Viacom manage to make significant and profitable inroads with VoD

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