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The Rundown: Despite the competition, why is everyone talking about YouTube?

July 29, 2024
in Technology
The Rundown: Despite the competition, why is everyone talking about YouTube?
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YouTube dominates TV viewing time and is pulling in TV ad dollars, but its ad growth is slowing, likely due to Amazon’s aggressive foray into TV ads and live sports. In other words, the battle for ad supremacy in the channel just got fiercer.

How fierce? Well, if the last quarter is anything to go by, YouTube — sometimes considered the least talked about video company — might just end up being the loudest contender.

YouTube’s ad revenue slipped from 21% in the first quarter to 13% in the second. Google blames it on last year’s sluggish start affecting this year’s growth.

Sure, but let’s not ignore the Amazon-sized elephant in the room. Amazon’s ad-supported Prime, launched in January, has upended streaming ad prices. With its massive subscriber base, the video service’s ad inventory is shaking up the negotiations for YouTube, Netflix and the rest.

That’s left YouTube with no choice but to shout about what it does best through its CEO’s letters and earnings reports, while its platform results speak for themselves. It may lack premium shows, but it has unmatched scale, extensive viewership data and a mix of every genre and subculture in one place. Plus, its algorithm is unparalleled in steering users toward popular content.

Here’s the rundown on what this looks like today:

YouTube’s solid user base

One of the most obvious metrics to identify which platform is most popular is the size of its user base. And in that race, YouTube is miles ahead of the competition.

YouTube has so far amassed more than 2 billion monthly active users (MAUs) to its platform, making it the second-most visited site globally, after its parent company Google. That’s nearly half of the total 5.44 billion people who use the internet worldwide.

By comparison, though TikTok is a private company, the entertainment app was last recorded as having 1.5 billion MAUs at the end of 2023, and is expected to reach 1.8 billion by the end of 2024, according to Business of Apps. And Meta announced that its family of apps reached a total of 3.24 billion during its Q1 2024 earnings call.

Amazon Prime has more than 200 million members globally, while Netflix announced during its Q2 2024 earnings report that it had 277.65 million global streaming paid subscribers.

YouTube is making its mark on CTV

With more money pouring into CTV advertising, YouTube has made sure to carve out a sizable portion for itself through YouTube TV. So much so that the platform’s CEO Neal Mohan said that viewers globally watch more than one billion hours of YouTube content on their TVs every day on average, in a letter that was posted on YouTube’s blog back in February. In fact, YouTube is hailed as the leader of streaming watch-time for 2023, according to Nielsen’s report on streaming in the U.S.

More broadly, by the end of 2024, U.S. CTV ad spending is expected to reach $29.39 billion, taking up 10% of total digital ad spending, according to eMarketer. This figure is forecast to grow 12.9% to $33.06 billion in 2025 and increase further, by 11.5%, to reach $36.86 billion in 2026.

To secure those ad dollars, YouTube TV has rolled out pause-ads, 30-second non-skippable ads and restrictions on ad blockers. It’s also leveraging Google’s AI to optimize ad break length and frequency. Why? Because YouTube TV wants to be the must-have screen in every living room.

“YouTube TV’s reach and engagement, exclusive content partnerships, audience targeting capabilities and unique measurement synergies with general YouTube, Search or Google Display make it a compelling option to accomplish many advertising goals,” said Amy Rumpler, svp of search and social media services at Basis Technologies.

And so far, those efforts are paying off, both in terms of users and advertisers. YouTube TV, for example, has already been able to record more than 8 million paid subscribers, while Anjlee Majmudar, vp of Brainlabs’ programmatic practice in North America, said that, on average, her clients are seeing 25% lower CPMs and 33% higher view rates for YouTube CTV.

“YouTube CTV has the best of both worlds, a differentiated content library and high quality viewing experience,” she added. “Also, Google is heavily investing in creating interactive ad formats that allow CTV to play mid-funnel.”

It took a minute for YouTube Shorts to really have a moment — likely because everyone was so used to YouTube’s long-form video format. But momentum around the app’s short-form offering started to build once monetization options were on the table from February 2023.

“The Shorts format specifically presents a unique opportunity for advertisers to engage with a broadened audience as well, reaching users who are not in the mindset or habit of regularly engaging with longer-form content,” said Rumpler.

It’s a view shared by Majmudar, who said she’s seen great results from testing the Youtube Shorts format to extend Brainlabs’ clients’ influencer campaigns, especially in the retail and CPG vertical.  “We’re seeing increased engagement as CTRs are over 1% (on average between 1% and 3.5%, dependent on vertical and creative) and low cost per view (on average under $0.25),” she added.

By comparison, the average CTR for TikTok is 0.45% while the average for YouTube is 0.24%, Majmudar explained. “While there are a ton of factors that impact the range, such as campaign type, creative, vertical and client goals — YouTube Shorts is proving to be a format with high engagement, which indicates the audience is there,” she said.

Having heard about the positive performance that Shorts has had so far, even Joey Bridges, group media director at MindruveMacarta, said his team is currently in the process of evaluating how YouTube Shorts fits into the company’s strategy.

Furthermore, Mohan also said that Shorts averages around 70 billion daily views, and grew 50% year over year — in line with creator-generated content growth.

“This points to users and creators gravitating to YouTube Shorts as TikTok starts to wane which is further fueling eyeballs on YouTube,” said Tucker Matheson, co-CEO of Markacy.

https://digiday.com/?p=551072

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