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The model doesn't work and never will be profitable.
I would expect the only point of the acquisition was to try to get that huge mass of visitors who are mainly kids used to using the google applications etc. to secure the dominant piece of the pie in the future - a strategical acquisition.
Also, the popular fairy tale that this was started in someone's garage is a non sense.
They had $ 8 M of financing for the start and additional investments afterwards - it's significant for the whole web 2.0. bubble that probably bursted already.
No one will ever be able to pull such a trick again.
Not to mention the whole popularity was only enabled by a loophole in the copyrights, so they could attract people to find their favorite stuff at you tube - all inclusive.
No one is really interested in Johnny from Nebraska playing guitar, everyone wants to see the celebrities, movies stars, music videos, politics, sports etc. - the real thing and real content.
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