YouTube’s Bandwidth: Cheap, But Not Free

How much is YouTube paying for the bandwidth to deliver its 1 billion page views per day? Credit Suisse says $470 million a year. RampRate says $174 million.  Google says “less than you think.” Now Wired.com asserts that YouTube’s bandwidth bill is zero, citing an analysis by Arbor Networks. The gist of the report is that YouTube has slashed its video delivery costs through the use of peering relationships and its in-house GoogleNet connecting its data centers (assembled through the company’s oft-reported purchases of dark fiber).   

Can Google really be paying nothing to deliver video? Dan Rayburn from the Business of Online Videosays Wired has misinterpreted the statment by Arbor Networks’ Craig Labovitz that ”Google’s transit costs are close to zero.” 

“Transit costs are not the same as bandwidth costs and Wired should know that,” Rayburn writes. He also says that although Google can cut its costs by peering with large ISPs, it’s not likely to strike similar deals with smaller providers.    

Peering allows two providers exchanging large volumes of traffic to save money by connecting directly, rather than routing traffic across their paid Internet connections.  Peering is often free as long as the amount of traffic exchanged is not out of balance, providing substantial cost savings for bandwidth for high-traffic sites and networks. 

Michael Masnick from TechDirt is also skeptical of the notion that YouTube pays next to nothing for bandwidth. “I’m not sure I believe that either, but at the very least, it points out that there’s a lot more to consider here than simply extrapolating out the number of videos times the basic cost of bandwidth,” Masnick writes. 

Google doesn’t share numbers on its costs, but a recent blog item suggests that it’s not losing money on its video infrastructure. ”The truth is that all our infrastructure is built from scratch, which means models that use standard industry pricing are too high when it comes to bandwidth and similar costs,” write YouTube’s Chris Dale and Aaron Zamos. “We are at a point where growth is definitely good for our bottom line, not bad.”