What's wrong with YouTube?
The Google-owned video giant should be in share-stealing mode, but...
Something seems off at YouTube.
Back in October, the Google-owned video platform surprised investors with its first-ever quarterly decline. The last week, during Alphabet earnings, it happened again.
In fact, YouTube’s ad revenue slid by 8% to $7.96 billion, dragging down Alphabet’s numbers overall, reported Variety.
Which could be explained away by the simple theory that, hey, whether or not we’re in a recession, advertisers are acting like we are, and are making cuts everywhere.
Except in this case, YouTube should still be in the share-stealing mode. It’s not shrinking, but rather growing exponentially in areas like short form and CTV.
Let’s look at the bull case for YouTube:
YouTube (plus YouTube TV) accounts for 8.8% of all streaming in the US, topping Netflix and everyone else, per Nielsen.
YouTube Shorts, the company’s TikTok competitor, now delivers 50 million views a day, up from 30 million a quarter ago
In fact, despite TikTok’s ascendancy, YouTube is showing now signs of losing time or audience
Top YouTube creator Mr. Beast is a global phenomenon, which would seem to only generate more buzz for the platform
But something is clearly not clicking here. As Michael Beach, CEO of Cross Screen Media framed it in his State of the Screens newsletter, “There should be rapid growth in advertising revenue due to the explosion in streaming TV use. This has not happened (yet).”
In fact, as Beach told me, YouTube’s streaming share grew 50% year over year, according to Nielsen. “No one else is growing that fast.” Yet linear TV advertising grew 3% over the past year, while YouTube climbed just 1%, Beach wrote.
These days, when you’re getting compared to linear TV, it stings.
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So what’s going on here? A few theories:
In Q4, brands were not only cutting spending everywhere, but as one source close to YouTube told me, the must-spend incremental budgets that usually come up late in the year - and would favor a platform like YouTube - just never materialized
TikTok is just stealing everyone’s thunder, even YouTube’s, particularly among big brands. “There is still a finite amount of time,” said Joel Cox, SVP Strategy & Innovation at Strategus. “As Americans spend two hours or more on TikTok, that’s time that is coming from Meta and YouTube and others. And brands see that.”
YouTube may feel the economy more acutely. As Sam Bloom, CEO at Camelot Strategic Marketing & Media put it, “When the top 100 advertisers brands make cuts, they tend to trim and move things around. YouTube has 7 million or so advertisers. Many of them just shut down spending when things are bad. So they really feel hiccups in the economy.”
Google is really pushing its AI-driven automated ad buying platform Performance Max, and right now, maybe that tool isn’t recommending YouTube that much
Apple’s crackdown on app tracking, which had really hit Meta and Snap, is hitting YouTube perhaps more than we expected? It depends who you ask. For his part, Strategus’s Cox said he thought YouTube might have benefited from ATT.
My theory, which I’ve talked about before, is TV Truther Syndrome. This is where brands and media sellers deny that YouTube is a factor in the TV market, and particularly on TV screens. I’m just back from the terrific Beet Retreat in San Juan, which featured two days of impressive ‘real talk’ about TV advertising’s many challenges and opportunities. Yet there was a strong undercurrent of the syndrome. Again and again we head that the only real premium video is found in sitcoms and dramas, and that all the research tells us that the mindset when someone watches ‘short form’ (a phrase that was uttered with great disgust) is just different, which ruins ad receptivity. “There is absolutely nothing like the TV experience, the greatest ad vehicle ever created” - more than one attendee said.
At the same time, every other panel at Beet mentioned how the current consumer experience in CTV, where the ads are both frequently irrelevant and repeated constantly, is god awful. So which is is - is TV the best medium ever or the worst?
At least YouTube puts consumers in control and lets them skip some ads- making it a safe bet that the ads people do sit through are at least tolerable, if not engaging.
The problem YouTube faces, Beach theorized, is that too many brands and buyers don’t think of it as TV, and current measurement tools don’t allow for apples to apples comparisons. “They have a content problem,” he said - and a measurement one. “If you put Mr. Beast’s audience against Sunday Night Football’s , for example, my guess is it would look pretty favorable. But right now we can’t do that.”
Of course, you could argue that the best ads on YouTube are branded content videos, such as the above Mr. Beast clip featuring him and his team going to Antarctica, and scaling a mountain upon which they planted a Shopify ad. Pretty hard to miss.
My question is, if YouTube continues to struggle to sway more brands to break their TV addictions, when does Google decide it needs to get a cut of those branded entertainment videos. That’s a complicated discussion for another day.
In the near term, what does YouTube need to do next to turn thing around? For starters, they must figure out whether monetization for Shorts works. The long game move is to change buyers’ perceptions regarding YouTube’s content. That’s where the deal to stream NFL Sunday Ticket will go a long way, said Cox. “That’s how they level up.”
Other than that, YouTube - very ironically -may be rooting for the US Government. “I’m sure they’d love to see TikTok banned.”