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September 11, 2007

Google: YouTube Now 35% of Users--Watch Those Margins

Googlelogo According to JMP Securities analyst William Morrison's analysis of Comscore data, Google continues to gobble up global market share at a fantastic rate.  From July06 to July 07:

  • worldwide users +20%
  • US users +18% (now 22% of 552 million global total)
  • time spent on sites +113%
  • page views +56%
  • Google Maps: blows past Yahoo to 682 million pageviews/mo +98% (vs. Yahoo's 397 million, +32%)

Even more startling: YouTube now accounts for 28% of total minutes spent on Google worldwide and an astounding 35% of global users.  This bodes well for Google's continued video dominance, but it also suggests the company's overall profit margins are likely to continue to decline significantly. 

As described here, YouTube's profit margins are likely to be vastly lower than those in Google's core business (and even in the AdSense business).  Although profit dollars are more important than profit margins, declining margins are generally hell on stock prices.  The bigger YouTube gets as a percentage of users and minutes, the more Google's profit per user/minute is likely to drop.  This could create a major headwind for the stock.

See Also: Economics of Online Video: One Tough Business, Economics of Online Video: Unit Cost Structure

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