How does a video streaming service with one billion active users per month and $4 billion in revenue not turn a profit? Ask YouTube, which couldn't break free from breaking even in 2014, according to a new report. Sources tell the Wall Street Journal that Google's video unit posted $4 billion in revenue last year, up from $3 billion in 2013, and that while the service accounted for 6 percent of Google's overall sales, it contributed nothing to earnings.
A core problem facing YouTube, which Google acquired for $1.65 billion, is that many users aren't visiting YouTube.com to watch the videos, instead finding them as embeds on other sites. That said, a Google rep tells Business Insider that the "vast majority" of its traffic indeed comes from the home page or its mobile apps.
YouTube has taken steps in recent years to entice more direct users, like creating exclusive deals with popular content creators, including Michelle Phan and Epic Rap Battles, and redesigning its home page to make it more of a destination rather than a repository. It has also addressed the issue that YouTube's core audience is too narrowly dominated by young viewers and this year signed a content deal with the NFL to host game clips and interviews.
"Google executives want [users] to turn on YouTube the way they turn on television, as a habit, where they can expect to find different 'channels' of entertainment," the WSJ writes.
But the premium content -- and the equipment and servers to deliver it -- comes at a cost and resulted in the company's bottom line being "roughly break-even," the report states. To boost viewership and ad revenue, YouTube reportedly plans to introduce a new way to target ads using Google. They'll also be rolling out more auto-play videos.