YouTube brought in over $1.1 billion in video ad revenues in 2014,
according to eMarketer.
That’s 19 percent of the entire U.S. digital video ad spend, which totaled $5.9 billion this year.
To better compete with platforms featuring only well-produced,
high-quality content, YouTube introduced its “Google Preferred” program
in late April. Preferred enables brands to advertise exclusively against
the top 5 percent of content on the site, in areas such as food, music
and gaming. Marketers can pay an even higher rate to allocate some of
that inventory to the top 1 percent of videos.
YouTube is seeking non-advertising revenue too.
To bolster its bottom line with non-advertising revenue,
YouTube is aiming to mimic the success of subscription services such as
Netflix and Spotify. In November, it introduced
YouTube Music Key,
which is currently in beta. For $10 a month, Music Key offers ad-free
listening, the ability to play music offline and in the background on
your phone, and access to Google’s Play Music All Access service. The
service brings music fans convenient access to hot new tracks as well as
the eclectic rarities and remixes uploaded by the YouTube community.
YouTube may also offer a paid subscription model for its video
content down the line. In late October, YouTube CEO Susan Wojcicki said
she’d like to offer users an alternative to pre-roll ads on the site.
“YouTube right now is ad-supported, which is great because it has
enabled us to scale to a billion users, but there are going to be cases
where people are going to say, `I don’t want to see the ads, or I want
to have a different experience’,” Wojcicki said in
an onstage interview
at a Re/code conference. She mentioned apps where users can “either
choose ads, or pay a fee, which is an interesting model. … We’re
thinking about how to give users options.”
YouTube’s competitors are gaining ground.
YouTube remains a massive, dominant player in the world of digital
video, but its competition has steadily gained ground over the course of
the year.
AOL has quietly become a digital video powerhouse;
Vessel is gearing up to launch a short-form Hulu, poaching YouTube stars as its key draw; and brands are moving away from a YouTube-centric strategy as they
embrace native Facebook video for their video marketing efforts.
Facebook is also
courting publishers, YouTube stars and other key partners in the looming battle for digital video dominance. The social media giant even
signed a deal with the NFL last week for access to short video clips, such as highlights and news, revealing the massive scope of its video ambitions.
The advance of YouTube’s competitors is reflected the latest data
from comScore, which tracks video viewership on U.S. desktop devices. In
November, YouTube still topped the charts with 162 million unique
viewers. But with 104 million unique viewers, AOL topped a major
milestone, breaching the 100 million mark for the first time. Facebook
sat in a close third with 95 million uniques, followed by Yahoo with 56
million. This past May, YouTube posted 150 million unique video viewers,
AOL had 66 million, Facebook had 81 million and Yahoo had 52 million,
according to comScore.
YouTube is investing in its creators (again).
In September, YouTube promised to
open up its checkbook to creators on the platform,
funding some of their original content efforts on a per-project basis.
This isn’t the first time it has tossed money at channels, however: Back
in 2011, it handed out $100 million to over 100 channels on the
platform, many of which were established media firms and figures. It was
an exercise in garnering legitimacy for the burgeoning platform.
This time around, with the money going exclusively to “authentic
YouTube creators,” YouTube’s motivation is completely different. It’s a
defensive move as competitors such as Facebook, Vessel and Vimeo court
YouTube creators with lucrative deals and revenue shares, Grantland
publisher David Cho explained to Digiday at the time.
It’s also about encouraging creators to produce longer programming,
said Outrigger Media CEO Mike Henry. “Stretching the popularity of
YouTube stars beyond their typically short-form clocks is going to
present a lot of advantages for Google, particularly for over-the-top
consumption,” said Henry. Specifically, content shaped more like TV
programming could appeal to a broader range of demographics as well as
advertisers more comfortable with that format.
YouTube networks selling for major money.
Massive media companies that want a piece of the digital video scene have an easy way in: buy a
multichannel network
(MCN). That’s exactly what Disney, Otter Media (The Chernin Group and
AT&T’s joint venture) and European broadcaster RTL Group did this
year with their respective acquisitions of
Maker Studios,
Fullscreen and
StyleHaul.
Maker sold for $500 million, with another $450 million tied to
performance goals; Fullscreen sold for somewhere between $200 to $300
million; and StyleHaul went for around $151 million. Other investment
activity in the space — including Hearst’s $81 million check to
AwesomenessTV, which bought it for a 25 percent stake — highlighted the
massive value of big MCNs.
Leading MCNs such as Maker and Fullscreen have grown their audiences
to the tens of millions, while keeping their productions costs extremely
low compared to TV and film. But these media giants snapping up MCNs
are paying for more than access to millennials and Generation Z: MCNs
enable marketers to deliver video ads to highly targeted audiences and
craft effective native ads with leading influencers.
-Digiday
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