YouTube's Business Model

What is a business model?

Business models are set criteria that are put in place, in order to create structure and plans for a company/business.

This can establish how a company will organise itself, from finance, staff structure, the ideas behind the business, and most importantly how it will make money (Profit).

The business model that I have chosen to research is YouTube; I am initially attracted to this as it would be interesting to find out where their profits come from and if all revenue in fact comes from advertising.

YouTube is a video-sharing website, where users can upload, view and share videos. It was created by three former PayPal employees in February 2005.

Firstly, Advertising has to be the most obvious and widely-accepted model for YouTube. However, within this category, there are several sub-categories, including text ads and video ads. YouTube has developed over the years from text ads to video ads. YouTube also promotes large advertising banners; with links to videos take for example the last Harry Potter premier. In addition YouTube sells slots in their search engine, similar to Google, for example when you type the letter B, Beyonce may come up first because her record company have paid for this type of advertising.

An estimate of YouTube’s revenue hit $825 million in 2010, and will reach $1.3 billion in 2011 and $1.7 billion in 2012; this was taken from Citi analyst Mark Mahaney.