YouTube Use Gives Google a Boost

Nov.26.10 | About: Alphabet Inc. (GOOG)

Google’s (NASDAQ:GOOG) video sharing site YouTube’s is seeing a rising number of users due to greater ease in uploading, viewing and finding videos – all for free. With new initiatives and apps to promote YouTube, and increasing use of YouTube apps on mobile devices from Research in Motion (RIMM), Apple (NASDAQ:AAPL), Nokia (NYSE:NOK), we expect the user count to continue to rocket upward over our forecast period.

While we expect YouTube users to grow to 817 million by 2017, the Trefis community predicts the number will reach 940 million, creating slight upside to our price estimate. YouTube forms a very small portion of Google’s overall business, accounting for 4% of Google’s stock price based on our estimates. However this could change as new initiatives and monetization methods come online in the future.

We currently have a Trefis price estimate of $632 for Google’s stock, about 7% above the current market price of $595.

Newer Initiatives Will Drive Traffic

The YouTube user base increased from around 63.4 million in 2006 to around 488 million in 2010. [1]

YouTube is expected to attract more users driven by its initiatives like integration with social networks like Facebook and the ability to send clips to friends as well as rate and comment on videos. Expansion of its video content to include short-form premium, professionally-created content will also improve the site’s profitability.

YouTube is testing a new feature that can automatically categorize all of its videos making it easier for users to search for videos. In June 2010, YouTube introduced a basic video editor which enables users to mix and trim videos. [2]

YouTube is also planning to launch a pay-per-view movie service in collaboration with Hollywood studios where new movies will be released on YouTube the same day as the DVD release and users will be charged $5 per movie for access. This could provide a new stream of revenue.

YouTube Apps for Mobile Phones

The ability of watching YouTube videos on a range of media like smartphones and tablets will drive more traffic to the site. YouTube apps are now available for Android phones, RIM’s BlackBerry, Apple’s iPhone, Nokia and Windows phone.

Google recently gave a preview of YouTube Remote, an Android app that allows users to control YouTube on a Google TV system. It also allows a user to begin watching a video on a phone and transfer it to Google TV. [3]

The average forecast by Trefis members predict the number of YouTube users will increase from around 579 million in 2011 to 940 million by 2017, compared to the Trefis estimate of an increase from 561 million to 817 million during the same period. The member estimates imply an upside of 1% to the Trefis price estimate for Google’s stock.


  1. Estimated based on data by market research firm ComScore
  2. YouTube Debuts Simple Video Editor
  3. YouTube unveils smart topics and Google TV Remote

Disclosure: No positions