How Google plans to build on YouTube's $15 billion in ad revenue
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For the first time, Google's parent company Alphabet disclosed details about YouTube's advertising revenue in its Q4 earnings report on Monday. In the 2019 fiscal year, YouTube captured $15 billion in ad revenue, growing 36% year-over-year (YoY) and accounting for almost 10% of the company's total revenue.
To put the platform's size in perspective, last year YouTube pulled in more money than all of the ABC, NBC, and Fox broadcast networks combined and was around $5 billion short of Netflix's overall 2019 revenue of $20 billion.
The decision to finally disclose YouTube's revenue after 15 years is likely motivated by a desire to highlight YouTube's growth amid an earnings miss and declining search ad growth. YouTube's ad revenue nearly doubled in the last two years, rising from approximately $8 billion in 2017 to $15 billion in 2019, with annual growth of around 37% and 36%, respectively.
In comparison, growth in the substantially larger Google Search & Other category decelerated, dropping from 22% in 2018 to 15% in 2019 - below most estimates for the year. The decline could be associated with the increased competition for ad dollars from Amazon, greater demands for privacy among consumers, or even the growth of Google's zero click search cannibalizing ad revenue - most likely a combination of all three.
By breaking out YouTube's revenue, executives will be able to highlight a business segment where they expect to see rapid growth even as the broader digital ad business tightens.
Google CEO Sundar Pichai highlighted two ongoing efforts to make sure YouTube continues to attract ad dollars in the years to come:
- YouTube's plans to bolster shopping on the platform, amid a more general push into direct response advertising. Like a number of digital platforms such as Facebook, Instagram, and Pinterest, YouTube is attempting to move further down the purchasing funnel and encourage users to engage directly with the advertisements placed on the platform. Last year, YouTube launched Shopping ads on the platform, which let brands advertise their products directly in YouTube's home feed and search results. And in the earnings call, Pichai mentioned they will be looking to better capitalize on the content uniquely available to YouTube, like "unboxing" videos and makeup/skin care tutorials, and leverage their experience advertising with Google Search to better contextualize ads placed in YouTube search results.
- YouTube's efforts to mitigate brand safety concerns via reworked policies around political content.Brand safety concerns took on particular importance in 2019 for YouTube with the world's largest advertiser Procter & Gamble threatened to pull spend amid concerns that ads were placed next to harmful content. Pichai said taking greater responsibility for platform content is a high priority for YouTube going forward and referred to a blog released on Monday, which detailed YouTube's plans for removing content considered political misinformation, as an example of that ongoing effort. While previous brand safety concerns have primarily been related to violent or extremist video content, Google is taking active steps to ensure politically charged or polarizing content stemming from this year's US presidential election does not also become an issue for brands.
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