Google (GOOG): The Failure Of YouTube

By Douglas A. McIntyre Published Jul 6, 5:34AM EDT

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By Google’s (GOOG) standards, YouTube was not a terribly expensive acquisition. The search company’s market cap is about $170 billion. It paid less than 1% of that for the world’s largest video site.

But, sometimes no matter how cheap something is, the price comes too high.

According to The New York Post, "YouTube’s numbers for 2008 don’t look pretty: while 3 billion videos are viewed every month, revenues could total an anemic sub-$200 million this year ."

There are a lot of theories about why YouTube does not work as a commercial enterprise. One is that the videos are too short. Another one is that they are too hard to search and put into categories.

But, none of those get to the heart of the problem. The quality of most of the clips is simply too poor for major advertisers to find compelling.

Who wants to put an ad that took $5 million to product next to a video made from a cellphone, no matter how many people watch it? A hard sell for companies used to seeing their ads on HD TV

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.