HOWZAT

Google does not release sales figures for YouTube but bloggers speculate it is not large: perhaps $125m (£89m) last year. Chief executive Eric Schmidt has admitted the company is struggling to work out how to make a profit from the service, which it bought for $1.65 billion in late 2006.

The same is true over at Facebook. Despite 175m members, sales were in the order of $300m last year, with founder Mark Zuckerberg saying that the social-networking site needs only to “sustain ourselves”. The trouble is that the consumer has been liberated by the internet and grown used to getting something for nothing. Banner ads slapped on Facebook pages are seen as intrusive.

Chris DeWolfe, co-founder of MySpace, the social-networking site bought by News Corporation, ultimate owner of The Sunday Times, detected a change of tack among Silicon Valley companies three years ago. “There was no real expectation to make money and, for some companies, there still isn’t,” he said. “Profit is not a dirty word any more, it’s a very happy word.”

In general, analysts still think the internet has its work cut out.

“Overall, the feeling is it is still a very modest sum of money for the huge level of engagement these companies have with their audiences,” said Alex Burmaster at Nielsen Online. Arora remains confident.

“Online video has the potential to be the largest advertising medium in the digital space in five to ten years,” he said. “I think it has the potential to rival search.”

YouTube is trying to become more user-friendly for media firms, and has struck advertising partnerships with the likes of Nike. It offers an identification system that allows rights owners to claim as their own clips posted on the website by fans or other third parties. They can choose to take them down or surround with advertising in a revenue-sharing deal with YouTube.

These deals, and deeper alliances, have the hallmarks of an uneasy truce. For broadcasters and music producers, YouTube has become an essential marketing tool for reaching the younger generation. Companies such as The X Factor producer Fremantle Media reason that they have a better chance of tracking down bootlegged videos by working closely with YouTube rather than opposing them.

“We had that concern before the deal and we still have it,” said Claire Tavernier, head of Fremantle’s FMX new-media division, which forged closer ties with YouTube last year.

She admits however: “Withdrawing at this stage would be a suicide strategy, to be honest. Some of it could be considered excellent marketing for our shows. It is about finding that balance of what is beneficial for us.”

She is realistic about how much additional income Fremantle can hope to rake in.

“The numbers are very small,” she said. “You really have to have a giant hit on YouTube to see anything like a few hundred thousand dollars.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive