Did The Recession Come Early For YouTube?

Seven big questions re: YouTube:
1) How does the volume of content on YouTube compare to other streaming services?
2) Does this mean YouTube does not have content costs?
3) How much advertising revenue did YouTube generate last quarter?
4) Why did advertising revenue decline?
5) Does user-generated content generate the same CPMs as premium video?6) How can YouTube generate additional advertising revenue?
7) What share of total TV time does YouTube account for?

Big question #1: How does the volume of content on YouTube compare to other streaming services?

Hours of content added per year:
1) YouTube – 262M
2) Amazon – 50K
3) Netflix – 40K
4) Disney+ – 5K

Big question #2: Does this mean YouTube does not have content costs?

Quick answer: No.  YouTube pays out ≈ $10B per year to their 2M creators.  The difference is this is a share of revenue rather than upfront cost and comes with less risk to YouTube. The creator takes on the risk of creating the content in hopes a big audience will watch it.

Quick math on YouTube creator model according to Andrew Rosen @ PARQOR:
1) 2M+ creators
2) Mr. Beast creates 25 videos per year
3) 0.1% of creators create at the same pace
4) 0.1% * 2M = 2K creators
5) 2K * 25 = 50K videos per year

Why this matters: YouTube can distribute 50K high-quality videos on its platform at little/zero upfront cost.

Big question #3: How much advertising revenue did YouTube generate last quarter?

YouTube advertising revenue (YoY growth):
1) 2019-Q3 – $3.8B
2) 2020-Q3 – $5.0B (↑ 32%)
3) 2021-Q3 – $7.2B (↑ 43%)
4) 2022-Q3 – $7.1B (↓ 2%)

Why this matters: It is the first time YouTube has reported a YoY decline in advertising revenue since 2018.

Big question #4: Why did advertising revenue decline?

Quick answer: As a result of YouTube’s reliance on direct-response advertising, Eric Seufert believes YouTube could be vulnerable to Apple’s privacy changes (ATT, etc.).

Big question #5: Does user-generated content generate the same CPMs as premium video?

Quick answer: No.  A combination of factors, including some that we’ve discussed previously.  A large issue is a bias against user-generated content compared to premium video.

Thought experiment: Does anyone have an example of a media plan that includes both premium video (This is Us, NFL football, etc.) and user-generated video (MrBeast, etc.)?  If yes, were they valued the same on a CPM basis?

Why this matters: User-generated content now accounts for a larger share of attention than television.  This content has been able to remain in a silo since it fell more under the social bucket (Instagram, TikTok, etc.), but YouTube blurs the line.

Your move Mr. Bezos: YouTube is launching Primetime Channels, allowing users to subscribe to 30+ streaming services directly inside YouTube.

What makes this smart: YouTube is the best video search engine, which will show content directly inside the app alongside user-generated content.  It will treat each streaming service like an individual YouTube channel.

What makes this extra Googley: Confusion and conflict between another product (YouTube TV).

Quote from David Pierce – Editor-at-Large @ The Verge:“It’s also a bit confusing from YouTube’s own perspective. YouTube has touted YouTube TV as the bundle of the future, and the product’s head Christian Oestlien told me earlier this year that he has identical aspirations to re-bundle the streaming services. So why isn’t Primetime Channels a YouTube TV feature? When I ask Teague, she offers two answers — well, one and a half. The one is that YouTube is global in a way that YouTube TV isn’t and that she sees a huge opportunity for Primetime Channels outside the US, “where some of the companies haven’t reached scale.” The half seems to be that YouTube and YouTube TV are different products with different teams, and in classic Google fashion, they don’t seem to work all that closely together. There’s also the unspoken other answer, which is that while YouTube TV is growing nicely, its 5 million users are barely a drop in the overall YouTube bucket.”

Big question #6: How can YouTube generate additional advertising revenue?

Quick answer: Both ad loads and ad pod sizes are being increased (10+ ads for more than 4+ minutes).

Quote from Eric Seufert – Media Strategist @ Mobile Dev Memo:“YouTube experimenting with increased ad load for Connected TV viewers, but it is also attempting to increase time spent on site through a recently-announced change to its Partner Program that will incentivize creators to generate content for its TikTok competitor, Shorts. As part of this change, creators can partake in a revenue-sharing scheme for the videos they create and upload to YouTube.”

Big question #7: What share of total TV time does YouTube account for?

Quick answer: YouTube accounts for 8% of total TV time and 22% of streaming TV time.

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