YouTube Grows, But Value Is Minimal for Google

Oct.12.10 | About: Alphabet Inc. (GOOG)

YouTube’s monthly user based has increased from around 63 million in 2006 to around 375 million in 2009, [1] representing an annual growth rate of around 180%. Although the growth and reach of YouTube is impressive, its contribution to Google’s (NASDAQ:GOOG) value is minimal. W estimate that YouTube accounts for only 3% of the $643 Trefis prices estimate for Google’s stock, about 23% above the current market price of $530.

YouTube’s traffic continues to grow as a result of integration with social networks like Facebook and social initiatives like the ability to send clips to friends as well as rate and comment on videos. Furthermore, we expect YouTube will continue to expand its index of content to include short-form premium, professionally-created, content that can lead to improved profitability for the site.

The average of Trefis member forecasts for Number of YouTube Users indicate an increase from 408 million in 2010 to 705 million by 2016, compared to the baseline Trefis estimate of an increase from 450 million in 2010 to 718.5 million by the end of the Trefis forecast period. The member estimates imply a small downside to the Trefis price estimate for Google’s stock.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Google’s stock to Number of YouTube Users.

Our complete analysis for Google’s stock is here.

Note:

1. We have estimated historical data for number of YouTube users based on information from several sources like Comscore, mashable.com, and multichannel.com.