YouTube Is Both Killing It and Underperforming at the Same Time

Six big questions re: YouTube:
1) How much advertising revenue is YouTube generating?
2) What share of total TV time does YouTube account for?
3) What share of total TV time does YouTube TV account for?
4) Is YouTube underbought relative to its share of total TV time?
5) What share of Alphabet’s advertising revenue does YouTube account for?
6) Why is Google (theoretically) killing the cookie?

Big question #1: How much advertising revenue is YouTube generating?

YouTube revenue (YoY growth):
1) 2019-Q1 – $3.0B
2) 2020-Q1 – $4.0B (↑ 33%)
3) 2021-Q1 – $6.0B (↑ 49%)
4) 2022-Q1 – $6.9B (↑ 14%)
5) 2023-Q1 – $6.7B (↓ 3%)
6) 2024-Q1 – $8.1B (↑ 21%)

Big question #2: What share of total TV time does YouTube account for?

Quick answer: YouTube accounts for 9% of total TV time and 25% of streaming TV time.

Big question #3: What share of total TV time does YouTube TV account for?

Quick answer: YouTube TV accounts for 1.7% of total TV time.

Big question #4: Is YouTube underbought relative to its share of total TV time?

Quick answer: Most likely.

Example #1: YouTube’s time spent with TV has grown faster than revenue.

Growth since 2021:
1) Total TV time – ↑ 47%
2) Ad revenue – ↑ 9%

Example #2: The streaming TV (CTV) ad market is growing 2X faster than YouTube’s share.

Growth since 2021:
1) All streaming TV advertising – ↑ 45%
2) YouTube streaming TV advertising – ↑ 22%

Keep in mind: YouTube could grow share by being more open on the measurement side.

Areas where YouTube is lacking in measurement, according to Allison Schiff:
1) Measurement companies don’t have access to YouTube ad data
2) No third-party tracking pixels on YouTube ads
3) Google chooses which data to “share” with its measurement partners

More: How to Treat YTD (YouTube Derangement Syndrome) – h/t: Mike Shields (Screen Wars #44)

Big question #5: What share of Alphabet’s advertising revenue does YouTube account for?

Quick answer: 13%

Share of Alphabet advertising revenue by source according to MobileDevMemo:
1) Search – 75%
2) YouTube – 13%
3) Network – 12%

Big question #6: Why is Google (theoretically) killing the cookie?

Quick answer: Profit.

Quote from Eric Seufert – Media Strategist @ Mobile Dev Memo:

“So given that Google must have a commercial motivation in deprecating cookies, what is it? The most obvious is simply margin expansion: Google’s network business, which serves ads on third-party websites and apps, will almost certainly suffer if the Privacy Sandbox is less effective for targeting and measurement than cookies (and early indicators suggest it is). If the economics of buying third-party open web inventory through Google’s tools degrades, some of that demand may simply be routed to Google’s owned-and-operated channels. And these channels feature much higher margin for Google than its Network business: Bernstein estimated in December 2022 that Google’s margin on Network revenue is 10%, while it’s 15% for YouTube and 55% for Search.”

Bottom line: Alphabet makes the same margin from $181M in search as it does from $1B in network revenue.

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