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TheStreet Open House

Google Sets Sights on YouTube Bonanza

NEW YORK (TheStreet) -- Since purchasing YouTube in 2006, Google (GOOG) hasn't entirely figured out how to milk its $1.7 billion investment for maximum profit. Sure, the company is making revenue on advertising, and according to Barclays, top line growth should be around 20% in 2014. This would mean YouTube will generate over $4 billion in revenue this year alone.

The company announced on Feb. 5 that Google Senior Vice President of Products and Commerce Susan Wojcicki will replace Salar Kamangar as the new CEO of YouTube. Kamangar, who was Google's ninth employee, may be moving to head up Google's investment division, often referred to as Google Ventures.

Wojcicki was Google employee number 16 and she goes way back with the company. According to SearchEngineWatch.com, in September 1998, Google founders Larry Page and Sergey Brin established the company in Wojcicki's garage in Menlo Park.

In 1999, she was hired by Google and was the driving force behind the acquisition of YouTube. For those of us who celebrate the such progress, Wojcicki will be the highest ranking woman at Google once she transitions to her new position.

What does all this mean for the future of YouTube and Google? YouTube has the potential to upstage mainstream entertainment, especially for the 18-to-24-year-old demographic (millennials). According to Neilsen Holdings (NLSN), millennials watch about 23 hours of TV a week and 2.5 hours of online video. In the latter space, the music and entertainment of YouTube plays a dominant role.

The business model differs from cable television in a highly lucrative way. YouTube is an open platform that allows anyone to place videos and other content with the hope of grabbing eyeballs and making some money. YouTube takes about half of the ad revenue that's generated on the site. It will make over $4 billion in revenue from its advertising in 2014!

Granted that's only 15% of Google's trailing twelve month (TTM) revenue of nearly $60 billion in 2013. But if the average analysts' estimate for Google's revenue in 2014 of over $70 billion comes to pass, YouTube needs to generate more, and that's where Susan Wojcicki comes in.

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