We believe that YouTube is used indirectly to drive profits at the parent, and that Google is currently incentivised to keep these profits hidden from prying eyes. The key indirect benefits accruing to Google of owning YouTube are as follows:
YouTube gains Google a critical slice of growing online video eyeballs, which will attract more marketing dollars to the Internet as a whole. This is much more important in the USA, where the main competitor Hulu is ad-funded than the UK, where the BBC iPlayer is taxpayer funded;
YouTube gains Google yet more important meta-data which can be cross-pollinated with data from other Google services;
YouTube traffic strengthens Google specifically in peering negotiations and generally in network design;
YouTube is probably a small fraction of Google’s overall cost base, and the spin-off benefits from lower overall unit costs;and
YouTube positions Google very powerfully for a key role as a gatekeeper in the copyright world.
