Lately, the media hubbub with Google Inc (NASDAQ:GOOG) has centered around the dynamic company’s shiny Google Glass innovation, which has become nothing less than a popular-culture touchstone.
The commotion has shoved YouTube, which Google Inc (NASDAQ:GOOG) acquired in 2006, into the background, but it shouldn’t be that way at all.
The question of whether YouTube can keep up with Netflix, Inc. (NASDAQ:NFLX), which has notched a decided public-relations win with its original content, could help determine whether Google Inc (NASDAQ:GOOG) itself will return to prominence as a hot stock.
As The Guardian newspaper noted, Wall Street estimates that YouTube brings in anywhere from $4 billion to $5.6 billion in revenue, accounting for as much as 10% of Google Inc (NASDAQ:GOOG)’s total revenue.
YouTube has had a rocky road. Last March, AllThingsD noted that YouTube’s ad revenue wasn’t “keeping pace” with the increasing view-counts, and expenses, of a number of YouTube’s partners.
MarketWatch.com published a piece on July 19 proclaiming: “Google Inc (NASDAQ:GOOG)’s bet on YouTube is finally paying off.” The site noted: “That’s good news for Google bulls looking for another source of revenue to sustain the company’s annual growth rate, which has slowed since the purchase of Motorola Mobility last year.”
Google’s shares tumbled in after-hours trading on July 18 when the company announced disappointing quarterly earnings.
As Fool.com’s’s Steve Heller noted:
In the second quarter, Big G reported year over year revenue growth of 19% to $14.11 billion, which translated into a non-GAAP income of $3.23 billion, or $9.56 a share. Analysts were expecting Google to earn $10.78 a share on revenue of $14.42 billion. The culprit appears to be that Google’s cost-per-click — or CPC — declined by 2% sequentially and 6% year over year, despite paid click volume rising by 23% year over year and 4% sequentially. This could indicate there’s potentially a structural headwind that’s driving down the CPC metric.
Google has appeared to be a tech juggernaut, even labeled unstoppable, at times. Hmmm. Remember what happened to previous dynamos such as Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL), both of which crushed shareholders’ dreams.
If nothing else, the Google executive team has proven itself to be resourceful. Acquiring YouTube in 2006 was an example. But that was then. Can YouTube now help Google avoid the pitfalls of other once-hot stocks that cooled off?
San Bruno, Calif.-based YouTube has burst into prominence as a video-sharing Internet site, originated by a trio of PayPal staffers in 2005. Viewers can upload, share and watch videos. It allows people to exhibit an array of user-created videos, encompassing everything from movie reels and TV footage to homemade videos and video blogs.
YouTube has become synonymous with the do-it-yourself creative spirit of the Internet in recent years. Trying to capitalize on the video-viewing experience, Google gobbled up for $1.65 billion nearly seven years ago. You Tube is also responsible for pushing the term “viral video” into our societal lexicon.
But what does all that mean to shareholders of Google? Well, considering it may pull in as much as 10% of Google’s revenue, YouTube might be Google’s secret weapon.
The article Is YouTube Google’s Secret Weapon? originally appeared on Fool.com and is written by Jon Friedman.
Jon Friedman has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Netflix. The Motley Fool owns shares of Apple, Google, Microsoft, and Netflix.
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