Google released stronger than expected second quarter earnings on Thursday. The company’s earnings rose 11 percent and revenue increased 21 percent. The company continues to dominate the online ad space, but like many other technology firms, the search giant is attempting to expand its portfolio of products and services. The company has completed its purchase of Motorola Mobility and is working on its hardware strategy. According to Google’s SVP, Nikesh Arora, on the earnings call, the company has also finally figured out a business model for YouTube, six years after its acquisition.
When Google purchased the video sharing site, many questioned its ability to monetize the site, but suggested the company is making money. Neither the earnings statement or Arora detailed revenue numbers for YouTube, but said users are uploading 72 hours of video every minute. Arora also revealed that thousands of content producers are earning six-figure income from YouTube. Google has also managed to attract advertising from American Express, AT&T and Unilever.
Google has been working to capture metrics that demonstrate that advertising on YouTube has a higher ROI for brand advertisers than traditional TV ads. Given the enormous number of YouTube users, YouTube could also provide greater reach than comparable TV ad spots. Google’s efforts to grow YouTube advertising seem to be paying off. comScore’s latest VideoMetrix report showed YouTube led delivery of video ads.
Continuing to grow advertising requires attracting users to see those ads, which is why Google is continuing to increase its investment YouTube programming. Last year, Google launched a premium channel initiative; reports suggested Google provided $100 million in advances for the effort. More recently, Google announced it is rewarding 1,500 video content producers for their successes with channels on YouTube.
Google has clearly made significant progress with YouTube. Perhaps, it can take its lessons learned there and apply them to its struggling Google+ social service or its burgeoning hardware business.