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.
With her experience in generating commerce and ad revenue, she should be able to help Google deliver. As of 2013, more searches are done on YouTube than on any other search engine other than Google itself. The video placements on YouTube, which help Google bring the most targeted demographics to the most appropriate advertisers, have the potential to grow exponentially.
GOOG data by YCharts
Notice how far that red line has plunged since the middle of 2012. It hasn't hurt the share price yet, but free cash flow and its yield are important financial metrics. YouTube again to the (potential) rescue!
If you've watched YouTube lately, you may have noticed a new, more diversified look and feel to it. Having purchased a production studio called NextNewNetworks, YouTube now has video-making technologies and the marketing prowess to attract a lot of people, including some remarkable video producers. Two years ago, YouTube announced it would spend $100 million to help finance 100 new and original channels.
Around that time, FORTUNE dubbed the $100 million investment as the most efficient spend in history after talking to Collective Digital CEO Reza Izad. Collective Digital represents some of the most biggest names on YouTube, including Madonna and NBA legend Shaquille O'Neal. When Izad said, "They planted a very big flag and got a lot of people's attention," he wasn't exaggerating.
In promoting a new YouTube CEO with an extensive background in both eCommerce and generating ad revenue, Google's determination to maximize the benefits of its YouTube acquisition has not abated.
Investors should be heartened by Wojcicki's promotion, and it won't be long until the results are felt both on the top and bottom lines.
At the time of publication the author had positions in GOOG.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.