by CC Pearce

Created on: February 04, 2010   Last Updated: February 05, 2010

YouTube's business model has gone from a question mark to a dollar sign since Google acquired the start-up in 2006 for $3.65 Billion. It seemed a hefty price to pay, but now YouTube has integrated a number of ways to turn the video service into a cash cow.

ADVERTISING

The development and expansion of the YouTube Partner Program has allowed thousands of people to run ads on each of the videos they promote. These ads are on channel pages, video pages, and overlays on the videos themselves.  

A few partners are even able to run pre-rolls and post-rolls on the videos - full video advertisements that play before or after the video. Google has been the king of serving contextual ads on websites, and this technology has found a home on YouTube were billions of pages are served every day.

Additionally, many corporations choose to run ad campaigns on YouTube's homepage - huge banner ads with a proven track record of interactivity have become popular means of promoting films and TV shows. These ads are expensive and effective, a very lucrative point for YouTube.

BANDWIDTH

One of the fears companies had when purchasing YouTube was the expense required to run it. The bandwidth costs were prohibitively high for a company that delivers video content to the entire world.  

But bandwidth prices have been falling and Google has found all kinds of clever ways of cheapening the expense of bandwidth - mostly in very technical ways like the way they route their traffic and their purchasing of "dark fiber" (unused fiber optic cable).

RENTALS

A potential game-changer for the world's largest video site is YouTube Rentals. Suddenly, there is an opportunity for instant worldwide distribution for independent filmmakers where they indie films can set their own price per rental and rental duration. This was tested during the Sundance Film Festival of 2010 and made a little over $10,000 - pocket change for YouTube.  

But as the program opens up to more people and advertising campaigns may begin to revolve around the YouTube distribution, it's easy to imagine the rental program evolving into a massive success.

LOYALTY

YouTube viewers are everywhere. With the social integrations of various services, the ability to embed videos across sites, and the fact that YouTube has become a powerful resource for research, information, and entertainment, the internet users of the world simple cannot help but be YouTube users.  

Individuals are consuming thousands upon thousands of videos and the innovations that continue to emerge only perpetuate the trend. And most of the time a person spends time on YouTube, ads are being run and the profits continue to tick upwards.

YouTube is a revolution and there profits show no signs of stopping. As advertising becomes more prevalent, bandwidth costs fall to $0, and new revenue streams emerge, and traffic continues to grow, YouTube will remain a titan on the internet with an infallible business model.

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