Google predicts bright YouTube future as TV budgets flow into the channel
Google has underlined the quality YouTube offers advertisers amid Facebook’s tightening grip on video budgets, trumpeting the channel’s potential to become a key revenue driver as more spend is pulled from TV.
The video service emerged the star in a quarter that saw the company’s advertising fall short of analysts’ predictions. While suspiciously timely given YouTube’s 10th birthday yesterday (23 April), Google’s decision to single out the video service served to show observers that it is not prepared to let its stronghold on video go without a fight.
Patrick Pichette, senior vice president and chief financial officer, assured analysts on a conference call yesterday evening (23 April) that the sole reason for talking about YouTube now was because of its performance. YouTube revenue rose 100 per cent year-on-year in 2014 although the company declined to reveal any numbers.
“I mean, we just happen to see on the YouTube side so much change in the last kind of couple of quarters that we thought it was worth mentioning,” Pichette said.
The platform is not yet profitable as funds are pumped back into it to drive growth and fuel its expansion into emerging markets.
It means there is a much higher volume of Trueview ads being seen and consequently scale plays a bigger role in its conversations with advertisers. The number of Truview ads grew 45 per cent in 2014 and all of the top 100 global brands have used the format over the past year. The ads currently monetise at lower rates than ad clicks but they are deemed higher value than search ads because they generally reach people earlier in the purchase funnel.
Speaking on the same earnings call, Omid Kordestani, senior vice president and chief business officer, said to date the company has run over 6,000 brand live studies for Google Preferred - a way for advertisers to reserve inventory from among the top five per cent of YouTube’s most popular and engaging channels – across some of the largest brand advertisers and found that that 94 per cent of the campaigns we studied drove a significant lift and an average of 80 per cent in ad recall.
It is why the company is bringing it back this year and expanding it to more than 10 new markets. Google Preferred is also attracting some of the biggest TV advertisers to YouTube, claimed Kordestani.
“More than 30 major brands that have never advertised on YouTube before signed on with Google preferred and saw such great results that they have continued to advertise with YouTube afterwards. YouTube is home to great content and engaged audiences, and we're seeing the natural shift of TV budgets.”
In what appeared to be a thinly veiled dig at Facebook, Kordestani asserted that people who watch videos on YouTube aren’t distracted by anything else on the site. Videos on Facebook appear in the News Feed amid a plethora of snapshots and posts though the company revealed that four billion videos are viewed daily on its seervce.
“When people come to YouTube, they come the intent of watching video, so it's the perfect time to reach them with a video ad, not when they are distracted by something else,” said Kordestani.
The insight into YouTube comes as Google looks to win more mobile budgets through video. Google, unlike Fabceook, has struggled to lift the value of mobile ads and video is seen as a way of fostering a more premium price point for upcoming formats.
Digital video advertising in the US jumped 56 per cent in 2014, according to eMarketer, hitting $5.81bn and is expected to increase another 30 per cent in 2015 to $7.77bn. Video ad spending on mobile devices will account for approximately 33 per cent of all digital video ad spending in the US this year, eMarketer predicts.