Alphabet's online video service, which started out as a medium where young people could have fun, has turned into one of the largest advertising sellers in the world.
Now it aims to surpass television's advertising market; However, in order to achieve this, it must be able to control the unlimited content world it has created. –Aaron PressmanFor years, the Super Bowl was the Super Bowl of the advertising world. The biggest stage, the biggest brands, the biggest audience and, of course, the biggest profit day for the channel hosting this event... As a matter of fact, in February, 96.4 million people tuned in to the television to watch this big organization and therefore the ads shown at the same time. .
YouTube and its producers are in their heyday. The service, which Google bought for just $1.65 billion in 2005, reported $20 billion in ad revenue last year. Analysts also point to billions of dollars in revenue from subscriptions to products like YouTube Premium;
However, the company does not share financial details about them. It is worth drawing attention to some points here: If YouTube were a stand-alone structure, its parent company Alphabet would be the world's fourth largest digital advertising seller after Facebook and Amazon.
But the real question that has Wall Street salivating is how big YouTube can get. YouTube's sales revenue in 2020 increased by 31 percent compared to the previous year; whereas its parent company, Alphabet, only increased by 12.8 percent. In this process, Let's add a note that discouraged analysts: We still don't know how much of the growing pool of money is profit; YouTube has significant expenses, such as fees paid to content creators and technology expenses.
The number one factor driving YouTube's rise in the advertising chart is the decline of traditional television broadcasting and cable TV. Pay TV audience viewership fell to 76 million in the U.S. last year and is expected to fall to less than half that number by 2025, according to market research firm Convergence Research. Advertising dollars also follow this audience. Spending on TV ads decreased by 12.5 percent last year, while video ads increased by 30.1 percent. In fact, analysts at eMarketer predict that spending on video ads will surpass that paid for TV ads for the first time in 2023.
“Everyone is on the lookout for new advertising opportunities for major advertising companies,” says Kieley Taylor, Global Head of Partnerships at giant advertising agency Group M. According to Taylor, as television audiences are declining, “We have to find other ways to appeal to a very large number of people.”
If you want to reach a large number of people, especially young people, YouTube is the ideal medium to do this. It is the most popular social platform among all age groups, and a recent study by Nielsen shows that the number of people under 50 who regularly use YouTube exceeds the number of people in the same segment who watch traditional television. Pew Research found in April that 81 percent of Americans use YouTube, followed by Facebook as the second most popular option at 69 percent. Of course, it should not be surprising that Generation Z knows and loves stars such as the Vashketov brothers, Felix Kjellberg (known as PewDiePie) and Liza Koshy as much as famous athletes and other celebrities.
When YouTube first appeared, it was able to dominate for a long time thanks to the billions of mobile phone users watching videos. But the platform has now become a force that has settled into living rooms, where people increasingly watch smart televisions or connect Roku, Apple TV and other advanced set-top devices to watch YouTube on the big screen. YouTube reported that 120 million people in the US watched the platform via television in December; This figure represents a 20 percent increase compared to nine months ago. On the other hand, among the five most watched platforms on connected televisions: Netflix, YouTube, Amazon Prime, Disney+ and Hulu, only YouTube and Hulu sell ads.
This sprawling advertising empire is YouTube CEO Susan Wojcicki's domain: The 16th-ranked Google employee in the 1990s, Susan Wojcicki has been running the video platform since 2014.
Growing up in Palo Alto, Wojcicki's father was chairman of the Department of Physics at Stanford University; He emphasizes that although hard work is important in the family, both he and his two equally bright sisters had a normal childhood. Later, in 1998, while working at Intel, he rented his garage to Google founders Sergey Brin and Larry Page. “I rented the garage not because I expected them to be successful,” says Susan Wojcicki. “I wanted to rent because I needed money to pay the mortgage,” he says of those days in a virtual meeting held via Google's Meet app.
Wojcicki saw YouTube's potential early; He says he was the first to encourage Brin and Page to purchase the nascent platform. Even after the platform was acquired, his skill and experience in building Google's massive advertising business naturally made him YouTube's top executive candidate.
However, it did not take long for Wojcicki to realize that bringing together videos created by his user base and large, image-sensitive advertisers would not be easy and smooth. YouTube has often failed to filter offensive content; It ran ads in racist and homophobic videos. Thereupon, in 2017, heavyweights of the American business world such as Coca-Cola, Walmart, Procter & Gamble and Starbucks stopped advertising on the platform.
Loss of advertising revenue, Alphabet's share price decline and public relations turmoil caught YouTube's attention. “We had to take all of these issues and solve them in a way that was convenient for both our users and our advertisers,” Wojcicki said. “This was critical for us,” he says. So Google expanded its use of machine learning and artificial intelligence to scan and detect harmful content, hiring thousands of employees to find and evaluate videos that might violate the company's terms of service. This is how the worst phase of the crisis was overcome and advertisers started to come back.
But the truth is that the underlying issues that led to the boycott in 2017 were never fully addressed. (See; QAnon, 5G conspiracy theories, vaccine microchips). However, as YouTube has grown, so has the infrastructure it has built to control and remove such content. Today, the system now has four pillars; chief product officer Neal Mohan describes these as four pillars. The first and most obvious is “weeding”, that is, finding the most inappropriate content and removing it from the platform. Second, “mitigation”: Leveraging YouTube's powerful algorithm to reduce the number of videos that cross the line and misinform on various topics and narrow the audience for this segment (Mohan acknowledges that the gray area on this issue poses a serious challenge, saying, “Especially when it comes to misinformation”) ,
For example, when the CDC issued revised guidelines regarding mask wearing on May 13, YouTube's algorithms determined that misinformation could spread and created a compilation of mainstream media coverage on the subject; This compilation of news also managed to rank close to the top notifications in the USA. The last move of the strategy was the "reward"; Creators who followed the rules were encouraged to watch their videos more. Ensuring that YouTube's content is safe and therefore suitable for advertisers has become so important that the metrics the company uses to track progress in this area have been incorporated into Wojcicki and executives' annual goals and increasingly made available to online audiences (these guidelines, They are the ultimate arbiters of success and failure in the Google realm). According to the most recent data on the company's website, the percentage viewed for videos that violated the agency's policies was between 0.16 percent and 0.18 percent in the first quarter; whereas this rate
a year ago it was in the range of 0.17 percent to 0.20 percent. (YouTube is not willing to disclose the video viewing rates on its site, but with over a billion hours consumed per day, it would not be wrong to say that even a 0.16 percent rate equates to a significant viewing rate.)
However, advertisers say they are impressed with the progress YouTube is making. “I would say I'm confident we're in a safe space,” says Ron Stoupa, chief marketing officer of art supply chain Michaels, which started advertising on YouTube 18 months ago. Patrick Daley, vice president of media at Dick's Sporting Goods, also notes that YouTube's "policies and tools generally work for the intended purpose."
Some advertisers may also hire outside companies to evaluate whether their ads are displayed in inappropriate content. “We don't let our partners do their own homework,” says Chris Paul, Verizon's vice president of digital marketing. “We must ensure that the evaluation and verification processes for us are carried out by an independent unit.”
But although ad buyers are happy with YouTube's content management, most observers are not convinced. Adam Neufeld, vice president of the Anti-Defamation League, says YouTube is “not taking the necessary steps” to combat extremism and harassment. “Although we have made different efforts and taken modest steps in this regard, the problems still remain gigantic.” Those who still criticize YouTube for allowing dangerous videos on its platform point to misinformation about COVID-19 and lies about election fraud as evidence of this.
The three-pronged relationship between the advertiser, YouTube and the network of multiple content creators can create both discussion and opportunity at the same time. Last summer, when the killing of George Floyd by a police officer in Minnesota sparked outrage across the country, YouTube was filled with videos about the crime and the experiences of other victims of police brutality. Some black content creators on the site promised to donate their ad revenue to organizations such as Black Lives Matter and invited viewers to click on their ads and watch the rest to show their support. However, advertisers who were annoyed by these repetitive clicks complained, and YouTube blocked such attempts. Company,
Beauty blogger Zoe Amira, who came up with the idea of donating to BLM, describes the decision as “disappointing.” “I can understand why they made such a decision to protect their relationships with advertisers,” he says, and then adds: “However, it would be better to make a decision based on the audience's reaction.”
Meanwhile, company management has used its influence to encourage advertisers to re-evaluate content that has been ignored in the past. One of them is hip-hop videos, a popular segment of YouTube that big advertisers have always avoided. YouTube noted that the top ten of every music video chart in the world is dominated by hip-hop artists, and called on advertisers to reconsider the genre; He assured that thanks to the latest technology, videos with inappropriate images or lyrics can now be eliminated. “If you're an advertiser and want to connect with your audience and gain a place in their culture, not being present in hip-hop is a big miss,” says Debbie Weinstein, Video Global Solutions Vice President of Advertising Collaboration at YouTube.
YouTube hasn't shared any details about how its efforts are working out, but there are signs that advertisers are slowly shifting in that direction. GroupM's Taylor states that by the summer of 2020, many companies included the Black Lives Matter phrase in the "banned words" list, and third-party software blocked ads from appearing in videos containing these words. However, as the platform became flooded with news and social commentary videos citing BLM, some advertisers agreed to remove the word from the ban list; “I am hopeful that many multinational companies are rethinking their approach and maturity in this regard,” says Taylor.
YouTube seems to focus all its attention on its own internal problems, but perhaps the real biggest threat to YouTube's future comes from the world beyond the platform. Currently, YouTube is one of the few streaming platforms that accepts ads, but HBO Max has announced plans to go this route soon; If Netflix or Disney follow them, this space will get crowded very quickly in no time. On the other hand, the same can be said for the short video app that still wears Silicon Valley's "new favorite" shirt. TikTok and Instagram, which feverishly offers people new video features and additional innovations to make money, also pose major risk factors for the loyalty of content creators.
YouTube is trying to increase its income source options in order to keep people who create videos on the platform. Content creators can already sell digital products like monthly subscriptions, online stickers, and sundries; All of this happens on YouTube sites and through the YouTube payments system. The next step is to develop a formula to collect a one-time payment, like a “tip jar,” from viewers who might get a lot out of a video.
YouTube's new 60-second or shorter video feature, Shorts, which launched in India in September and in the US in March, has already reached 6.5 million views per day. This quickie option offers content creators who complain that the demand to produce enough content to become a top YouTuber can be overwhelming and lead to burnout, a place to produce simpler videos and, yes, help YouTube challenge TikTok. It has created a $100 million fund for YouTube creators to produce short videos and is also reorienting its advertising system to the new format.
YouTube is also experimenting with methods that can create more value for advertisers. One of such experiments, which will be put into effect on a larger scale soon, will be the opportunity to access Google Merchant Center (a tool that allows various information such as images, prices, stock, etc. of products on e-commerce sites to be sent to Google). This feature allows advertisers to link to their products in appropriate content; So, those who search for “best baseball glove” on YouTube, for example, will see a series of glove ads on video.
Of course, the ultimate threat to any Big Tech player, especially now, comes from regulation. There is a concerted effort to crack down on social media all over the world; In the case of dangerous posts or videos, suggestions such as holding companies that accept the content legally responsible are on the agenda.
Some critics of YouTube think that such legal regulations are the only way to combat harmful content. “We shouldn't expect private companies to save the world,” says Yotham Ophir, a professor at the University at Buffalo who studies misinformation. “I don't trust them… They can do much better, but they need incentives to do it.”
Wojcicki clearly opposes this. Some proposals would make it impossible for amateurs to post videos, which would hinder the creative economy that supports the company.
“We want to work with governments to make sure they do the right thing for citizens and communities,” he says. “However, it cannot be said that this issue has been thought through in detail.”
Undoubtedly, YouTube has experienced what can happen when something is done without careful calculation and thought, and unexpected results can be encountered, and it has had its share in this regard. In short, you need to click the “subscribe” option to predict whether the future of YouTube will follow the path drawn by Wojcicki or take shape with a different model.
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