Miracle World Media Blog

Over the past couple of weeks, I have come across a number of articles suggesting that YouTube and Facebook are not making as much money as people would expect.

First, Credit Suisse reported that YouTube will lose an estimated $470 million in 2009. Half of YouTube’s expenses ($711 million) are towards the high bandwidth costs. Google is hoping that online advertising will eventually turn the site into a profit, but one has to wonder if they will ever reach that goal.

On a similar topic, last month Business Week reported that Facebook was looking for an estimated $100 million in credit financing to help pay for the rising server costs. Currently, Facebook has an estimated 275 million users and is registering close to 1 million users per day. Last year, Facebook was estimated to be worth $15 billion, but with the company looking for credit financing, the estimate is probably slightly inflated.

It appears that some of the popular web 2.0 sites are having some issues with the high IT operations costs. In the late 90’s, the popular business model for upstart websites was online advertising, but after 10 years, is it still an effective business model as the main source of revenue? Evidence seems to suggest no.