In 2006, Google paid a handsome $1.65 billion for video sharing site YouTube. Now three years later, the company has yet to turn a profit from its acquisition - but that may change soon. The search giant is looking at YouTube's not-so-distant future and it sees a lucrative business, according to CFO Patrick Pichette.
This year alone, analysts expect Google to lose between $70 million and $500 million on its grossly popular video site. Despite being in the red, YouTube has seen an explosion in popularity and viewership. That wide userbase may eventually turn a nice penny for the search company, as they work to coax new advertisers to the site.
Google has been working more closely with Hollywood, inking deals with Time Warner and Walt Disney. By signing those agreements, they hope the additional professional content will lure more advertisers. Although the company seems optimistic about YouTube's future, analysts offer a polarized outlook about the service's ability to generate profit.
"These are not signs of what I call a smart acquisition, these are signs of a dumb acquisition," said Global Equities Research analyst Chip Chowdhry. Bernstein Research believes that even if the company begins turning a profit, it won't be enough to cover costs associated with bandwidth and data storage.