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State of the Screens

Can Anything Slow Down YouTube?

By February 10, 2022No Comments

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YouTube advertising revenue (YoY growth):
1) 2017 – $8.2B
2) 2018 – $11.2B (↑ 37%)
3) 2019 – $15.1B (↑ 36%)
4) 2020 – $19.8B (↑ 31%)
5) 2021 – $28.8B (↑ 46%)

Revenue comparison (YoY growth) for 2021:
1) Netflix – $29.7B (↑ 19%)
2) YouTube – $28.9B (↑ 46%)

Why this matters: Netflix generated more revenue in 2021, but YouTube is growing twice as fast.  YouTube generated higher revenues in 2021-Q4, which is likely to continue in the near term.

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Big question #1: What share of the U.S. video ad market does YouTube account for?

YouTube’s share of U.S. video ad market according to eMarketer / Cross Screen Media:
1) 2019 – 4%
2) 2020 – 4%
3) 2021 – 6%
4) 2022P – 6%
5) 2023P – 7%

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

Quick answer: ≈ 6%

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Wow: In 2019, YouTube’s ad revenue was close to the combined total for NBC/CBS/Fox. Since that point, Youtube has grown revenue by 90% while national network TV has declined by ≈ 2%.

Big question #3: Does YouTube spend similar making original content as other streaming services?

Quick answer: No. YouTube is not a big upfront spender on original content.

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Why this matters: YouTube is not reliant on high-production original scripted programming that requires upfront costs.  Rather they developed a monetization platform where 2M+ creators can generate revenue from their content.

Big question #4: Does this mean YouTube does not have content costs?

Quick answer: No.  YouTube pays out ≈ $10B per year to their 2M creators.  The difference is this is a share of revenue rather than upfront cost and comes with less risk to YouTube. The creator takes on the risk of creating the content in hopes a big audience will watch it.

Quick math on YouTube creator model according to Andrew Rosen @ PARQOR:
1) 2M+ creators
2) Mr. Beast creates 25 videos per year
3) 0.1% of creators create at the same pace
4) 0.1% * 2M = 2K creators
5) 2K * 25 = 50K videos per year

Why this matters: YouTube can distribute 50K high-quality videos on its platform at little/zero upfront cost.

Bottom line #1: YouTube has been developing monetization tools over the past 14+ years.

Bottom line #2: This may appear like the perfect (low-risk) model, but there are unique challenges to dealing with user-generated content.  For example, in the first half of 2021, YouTube’s system caught 729M (4M/day) copyright infringements.  They had to deal with 3.6M+ appeals from creators leading to 2.2M claims being overturned.

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Michael Beach

Michael Beach is the Chief Executive Officer of Cross Screen Media, a media analytics and software company that enables marketers to plan, activate, and measure CTV and linear TV at the local level. Michael is also the founder and editor of State of the Screens, a weekly newsletter focused on video advertising that is a must-read for thought leaders in the advertising industry. He has appeared in such publications as PBS Frontline, The Wall Street Journal, The New York Times, Axios, CNBC and Bloomberg, and on NPR’s Planet Money podcast.