Why Isn't Google Able To Make Money From YouTube? Pivotal Analyst Has The Answer

Even though YouTube is one of the biggest traffic source for Google Inc GOOGL, recent reports have highlighted how the company is not making any money off of it.

Brian Wieser, senior analyst at Pivotal Research Group, was on Bloomberg Monday to talk about the importance of YouTube for Google and what problem the company faces in monetizing it.

The Importance Of YouTube

"I think that the revenue numbers don't tell the whole story around YouTube," Wieser said. "The first thing is that YouTube is arguably the second-most important search engine. If you think of it that way, you could argue, it's a really critical, strategic buffer if you are Google that help prevent anyone else from taking meaningful market share in search."

Related Link: Expert: YouTube Could Be Worth $40 Billion If Spun Off Google

The Problem With Monetization

When asked why YouTube doesn't make any money if it's so important to Google, Wieser replied, "Part of the problem is that they don't charge consumers to use it. Very little of what they have available is palatable to most advertisers and so there's relatively of video that they deliver which is monetizable."

No Revenue To Offset Costs

Wieser feels that Google isn't able to make any profits off YouTube because "when you think about 5 or maybe even 10 percent of most of content being monetized, the problem is you have 90 plus percent of videos being delivered around the world, which is really expensive."

"When you think about the cost of the data centers, cost of streaming, all sorts of other administrative costs too and they have built a pretty good consumer product that's not free. So, there's a lot of place where they have costs and there's no revenue that's going to necessarily offset that," Wieser concluded.