$8 billion – and for what?

Michael Learmonth writes in the Silicon Valley Insider that in the three years since YouTube was launched, investors have spent US$8 billion on online video – and that’s just in the US.

He writes: “What did they get for their troubles? So far, next to nothing. YouTube, which accounts for more than half of all video views, will generate a mere $200 million in sales in 2008, and the industry has yet to produce a profitable company.”

But, as he points out, “Yet, while most VCs are unlikely to see any return on their investment, we don’t think $8 billion is an outrageous number. Consider:

  • Online video is in its infancy. YouTube didn’t exist four years ago.
  • 119 million people watched an online video in May.
  • $1.35 billion will be spent on online video advertising in 2008 (though much will go to video sites that weren’t venture funded, like ABC.com)
  • Advertisers poured $17 billion into broadcast and cable TV in the 2008 upfront

It also pales in comparison to other speculative investments of the past few years; Merrill Lynch wrote off $9 billion in bad mortgages in the first quarter of 2008 alone (and $29 billion since the meltdown began.)”

I don’t know about you, but I think it’s time to launch myself an online video site…