Is Google considering spinning out YouTube?

Is Google considering spinning out YouTube?

A recent analyst report by Credit Suisse that YouTube could lose as much as $470 million in 2009 has prompted some insiders — and outsiders -- to try to stir up enthusiasm for a YouTube spin out. The loss is not insignificant, even for Google, which recorded $4.2 billion in net income in 2008. To put it in perspective, the estimated YouTube loss exceeds the $448 million Google spent on salaries and other administrative expenses for the first quarter of 2009. It also exceeds what Google spent on sales and marketing.

But in a conversation with reporters on Thursday, Google Chief Executive Eric Schmidt said the company is committed to YouTube. “We believe YouTube will eventually be a successful and profitable business and that it will take some time to do that. I don’t know how long it will.”

Schmidt also downplayed another option for reducing the expense of YouTube by downgrading video delivery to third-world countries where advertising revenue is insignfiicant. “I have not personally been in meetings where there were discussion on throttling bandwidth because of its costs,” Schmidt said. “In general we don’t link the two (bandwidth and cost). A typical example is India. A few years ago… we spent quite a bit of money to dramatically increase the connectivity to India even though it had no short-term or even near-term way to justify it economically. And I’m very proud of that. That’s how Google works. So I would discourage a linking between the two.”