The new streaming (ad) war is Netflix vs. YouTube
The new streaming (ad) war is Netflix vs. YouTube
Amidst a potential recession, 2023 may present brands with a stark choice - 'premium' vs. the creator economy
YouTube appears to be feeling the heat from all the Netflix ad hype. So much so that the company is willing to point out flaws among its children.
I chatted with Google’s Brian Albert on my podcast this week, and he was looking to make a super interesting/eyebrow raising argument. That the $50 billion YouTube has spent on creators over the past few years is comparable to the billions big media companies are laying out on premium content, including the $17 billion Netflix drops each year.
You will likely find many in Madison Avenue and Hollywood who will have a problem with that math - how can you compare spending millions on Bridgerton and The Crown, versus doling out an ad revenue share to a creator walking viewers through Minecraft levels or makeup tips?
But Albert did make an interesting point - noting how much the biggest YouTube creators are putting back into their content, such as Mr. Beast spending $3.5 million last year to recreate the Squid Game set at scale.
YouTube’s argument is that this cash is actually money way more well spent than in TV land, since creators only put cash into content that their fans are predisposed to watch, he says. Compare that to TV studios, networks and even streaming services putting stuff out there and hopping it works (some times you get Dahmer, sometimes you get that Mike Myers show that Netflix would like to forget).
What’s that got to do with advertising? Albert argues brands will benefit more from being attached to that creator reinvestment process versus just running ads next to shows.
“We’re spending a bunch of time with brands and agencies right now talking about how YouTube truly sits at the center of the creator economy, and why creator-produced content, frankly, is a more durable business model for producing streaming content for any ad supported platform.”
What really struck me during our pod chat was that Albert cited Cobra Kai - which was birthed on YouTube but really exploded on Netflix - to make his comparison. The Cobra Kai pilot on YouTube has generated 140 million since 2018, while the Mr. Beast Squid Game video has generated over 300 million in just a year. (We don’t know how many people have watched Cobra Kai on Netflix - but since we’re five seasons in, the guess here is - lots).
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Regardless, Albert’s willingness to throw what was once YouTube’s ‘we’re legit content people’ series under bus seemed less about poking holes in the old school TV pilot process, and more about pitting creators against the establishment in the battle for TV eyeballs-and ad dollars.
“Our endemic creators are starting to spend significantly more on production, like Hollywood’s always done, but they are driving significantly more viewership on YouTube than Hollywood-like shows, and honestly that’s a big reason that YouTube surpassed Netflix as the number one streamer in the US [per Nielsen],” he said.
(Translation - YouTube is worried about Netflix’s ad business).
There is no question YouTube is big on TV. As Hershey’s head of media and analytics Vinny Rinaldi told me last week that - 25-30% of impressions are on CTV devices when they buy YouTube - not just CTV only buys.
Some might say that nobody is even in YouTube’s CTV league.
For now at least. What if Netflix’s ad product scales quickly? It’s not inconceivable that the CTV ad market becomes a two, maybe three horse race, not unlike the broadcast networks battling for all the TV ad dollars in the 1980s and 90s. Netflix, YouTube, and Disney/Hulu are the only ones with significant share at the moment.
From YouTube’s point of view, Albert is betting that brands will ultimately favor with scale-plus-audience-connection, not just eyeballs.
Here’s a challenge though - we’re heading towards, or maybe in, a serious ad recession, and marketers are only going to lean more in on media that can deliver performance and accountability.
“All clients are expressing more than ever before that they want to know what works best for their business,” said Albert. “How they can ensure the effectiveness of everything they are doing on YouTube.”
On the performance front, what YouTube has going for it is its identity data and an existing performance ad base - and of course, lots of viewers. In Netflix’s case, the company should be able to offer broadcast-esque reach (if people sign up), as well as a pretty canvas and a limited number of advertisers. Whether those ads prove to be as effective as ads tied to creators is anybody’s guess.
Here’s the rub. YouTube’s strengths are intrinsically tied to influencer budgets. My question is, if we head into a harsh recession - what happens there?
As Hershey’s Rinaldi explained, for brands that don’t sell directly only, quantifying the impact of influencer campaigns is tough. “We don’t own the end game,” he said We don’t have a coupon code. How do you really measure the impact…it’s a really big challenge
Yet then again, all you read is how much Gen-Z responds to influencers over other celebrities, and how they use TikTok to search, etc. etc. So it would seem dangerous to pull back on spending here, right?
That will be a big battle going forward for CMOs - how do you keep tapping into the power of the creator economy while keeping the CFO happy?
In the meantime, the battle for CTV spending is about to become very heated, very new media, and maybe very old school.