Knowledge@Wharton analyzes the Youtube Revolution:

Video streams viewed rose 50% in 2005 and are forecasted to rise 32% to more than 23 billion served in 2006, according to AccuStream. Comscore notes that the average consumer of online video watches 100 minutes per month, up from 85 minutes six months ago. YouTube says people watch more than 70 million videos a day on its site. IDC forecasts that online video services will generate $1.7 billion in revenue by 2010, up from $230 million in 2005.

And, while these technical developments are important, Fader adds there's a particular technology -- the addition of video playback to Adobe System's ubiquitous Flash Player -- that has helped online video explode. The Flash software, bundled with all the major web browsers, allows rich media to be displayed on the web without requiring a separate media player. "I don't think people fully appreciate the transformation Flash has created," says Fader. "I usually don't like to put technology on a pedestal, but Flash means you can see video without waiting."

The article also elaborates on potential business models that Youtube could undertake to make their business less money loosing:

Whitehouse agrees. While advertising revenue for online video may be significant in the future, startups like YouTube and Guba have to pay for the bandwidth to deliver content today. YouTube has reportedly raised $11.5 million in venture capital funding from Sequoia Capital, but "their bandwidth usage is enormous. And bandwidth costs money," says Whitehouse. "It's unclear what the long-term business strategy is and how long they can sustain their current burn rate [of expenditures]."

Meanwhile, advertising may not be a holy grail. Consumers may revolt when ads start appearing in videos, says Whitehouse. Online video companies will have to weigh the pros and cons of embedding ads within videos versus placing them on the web pages on which the videos appear. "There may be a lot of resistance [from users] to ads embedded in user-uploaded videos," he says. But YouTube's popular feature that allows users to place videos on their web pages may not leave the company with many options. After all, video displayed on another site can still use YouTube's bandwidth without displaying any other YouTube content, such as ads -- unless YouTube decides to embed them in the videos. "The same features that have made the site so popular may make it hard to monetize," says Whitehouse.

Youtube needs something like the "Adwords explosion" - it's pretty big already and can't easily scale back in size. Also it will be hard to charge micropayments for contents that are free now. Google started without business model and together with Oveture developed one. Maybe Youtube gets lucky or they will implode before the end of 2008.