Mary Meeker does New Maths - Again!

Thursday, August 23. 2007

Mary Meeker does New Maths - Again!

You can't make this up...Henry Blodget (yes, that one) has noted that Morgan Stanley's Mary Meeker (yes, that one too) has erred in her calculations of what the YouTube Ads were worth next year. (Update...they have had another bite at the cherry - see end of post)

Ms Meeker estimated $720 million benefit (15% of $4.8bn gross revenue), only problem is that they misunderstood the $20 CPM that YouTube is charging...CPM means Cost per mille (it's from the latin , means thousand) so one has to divide the $720m number by 1,000 - ie it's $ 720k - and that's 0.004% of Goog's revenues, not 4%

Ooops

And if $720k is the gross benefit YouTube will get from potentially pissing off its customers with Ads and sending them elsewhere....

Ooops again

(I checked the maths, and so can you - its in Exhibit One on the second page over here)

So that's how the Great Web 1.0 Boom and Bust happened

(Actually I feel really sorry for Mary and the team, its just the sort of mistake we all make when we're in a hurry - but sorry guys, its just too good to not blog about

But assume the recast numbers are roughly right - 2 billion clips/month, 1% have Ads served, $20CPM, 15% goes to YouTube = $720k. I don't know what YouTube's burn rate is right now, but 18 months it was reputedly $1m a month, and that was with an order of magnitude less clips served - so that number probably has to go up 2 orders of magnitude to be profitable. It's not likely to come from much higher CPM, so it has to come from % clips with Ads served - assuming people will put up with near 100% clips with Ads - or from elsewhere.

Update - its been picked up by Valleywag over here

Postscript - The Morgan Stanley Team have changed the numbers!

Yup, that 1% of YouTube clips going to Ads gave the Wrong Answer - as we noted above - so they have upped the %, at the same time as YouTube is shuffling backwards

Post - Postscript - BubbleGen reckons CPM's for clips can go north of $100.....It would be interesting to see the rationale for that.

Posted by Alan Patrick in Online Advertising at 17:38 | Comment (1) | Trackbacks (2)

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Thanks Alan: too good a mis-step to pass up on

and like the comments on the viability of the monetisation model too

#1 tomas (Homepage) on 2007-08-28 15:45 (Reply)

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