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Is YouTube Google's Secret Weapon?

Youtube
CNBC.com
Youtube

YouTube made a lot of headlines when it launched its original content channels—but it also is making a lot of money. More specifically, its revenue this year is expected to be twice the cost of the company back in 2006.

Following Google’s shareholder meeting Thursday, Citi analyst Mark Mahaney updated his analysis of YouTube, with an even more bullish take on the video site than he’d had before.

Mahaney says that the role that YouTube plays at Google is underappreciated: it puts Google “squarely in the middle of one of the largest trends in advertising today – the migration Online of TV/Video ad budgets.” What’s remarkable for a company that’s been around since 2005, is that it’s managed to keep up massive growth: 20 percent year-over-year unique visitor growth and nearly 40 percent year-over-year growth in page views.

And then there’s the increasingly large role YouTube plays boosting Google’s bottom line. Mahaney estimates that YouTube is likely on track to generate over $3.5 billion in revenue this year, for 50 percent year-over-year revenue growth. That’s more than double the revenue Mahaney had forecast last year. Putting that number in context: it’s about 50 percent more than Yahoo!’s total display ad revenue and in line with Netflix total subscription revenue.

Though the vast majority of YouTube’s videos are user-generated content, advertisers are increasingly paying attention to the original programming YouTube is rolling out on its original channels. The likes of Jay-Z, Madonna, Ashton Kutcher, and Lady Gaga, plus a number of TV producers, are putting together and curating channels—exactly the kind of professional content that advertisers feel comfortable with, along with the potential reach to many more people than even broadcast TV.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.