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YouTube Ads in 2018

August 22, 2018
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YouTube’s Position in 2018

“YouTube viewers now watch more than 180 million hours of the platform’s content on TV screens every day.”

Stats don’t lie. And YouTube is clearly on the rise. More and more people are turning to YouTube for entertainment, news, how-to instructionals, general information and yes… Advertising. We’ll get to that in a minute, but first, let’s look at a few things:

Millennials Aren’t Paying for Cable

If you’re a millennial, take a second to think about how you consume video content outside of live sporting events. My bet is that you’re either using one or more services consisting of Hulu, Netflix, HBO Go, Sling, Amazon or YouTube. Streaming services are the new network television.

Now take a look at the aforementioned services and ask yourself “how many of these monetize via in-platform advertising?”. Hulu does but they have a premium, ad-free membership for just a few more dollars a month. Sling features live streaming network television. But really, advertising opportunities are limited with the exception of YouTube.

Cable Television as an ICU Patient

Cable television is fast approaching its end. The only two audiences that they’re holding on are sports fans, the Fox News faithful, and some of your parents; and slowly but surely, streaming services will cater to those demographics. And why should we give our money to cable TV? It’s inconvenient, we have to deal with advertising that has nothing to do with our interests every 15 minutes, and what we actually want to watch is rarely readily available.

In all, it’s an antiquated and broken distribution network that has been eclipsed by superior technology. Cordcutternews.com states that Cable TV could be “dead” in as little as 2 years. If this happens, Google will be in a prime position to capitalize on billions of more ad dollars with YouTube (worth remembering that Google bought YouTube for $1.6B back in 2006 and the network has been theorized to generate $15B/year as of 2017. Good on ya Google).

YouTube as an Advertising Vehicle

Now that we’ve established that Cable TV is dying and Google is in a prime position to capitalize, we need to consider a couple of roadblocks that YouTube will still need to overcome:

  1. Adwords (excuse me, Google Ads) is still widely regarded as a performance marketing platform; so buy-in from current Google Ads users into YouTube has historically been tough as YouTube doesn’t necessarily convert users directly into customers as well as paid search or product listing ads do.
  2. YouTube doesn’t have the traditional Cable Network model which may deter advertisers.
  3. Many companies that really care about their top line revenue are pretty aware that Search/Shopping campaigns can articulate the most amount of revenue within the Google library of ad inventory.

These are going to be difficult obstacles to overcome; and even if those were smaller issues Google is not blind to the fact that the media consumption landscape in and of itself is changing rapidly. People don’t want to watch ads, and people don’t want to pay an arm and a leg for premium content. This is why Hulu, Netflix and Amazon Video Services have grown exponentially in the last couple years.

Google has seen this and responded with a few services to cater to that interest:

  1. YouTube TV is a premium/subscription anti-cable solution where the user has access to cable television hosted through wi-fi (Sling, Hulu competitor).
  2. Youtube Premium is another subscription model that offers an ad-free Youtube experience (videos/music) with original content (Netflix/Amazon competitor)

Great thought by Google to try and crack these markets. But the big issues here is that they are not the first mover and the competition is stiff, to say the least. Let’s take a look at some stats to build this picture:

  • Netflix has amassed 118 Million global subscribers.
  • Netflix will spend an estimated $6 Billion on original content in 2018
  • 52% of ALL Americans have an Amazon Prime account
  • Amazon will spend an estimated $4.5 Billion on original content in 2018

Considering each platforms’ already extensive list of original content, Google has some serious ground to cover with YouTube originals.

In a broader sense, Media is incredibly lucrative and you can see that by looking at Netflix’s market cap growth within the last 2 years. The slow death of Cable has really helped out mass adoption for Netflix and it’s easy to see why the 2nd and 3rd most valuable companies in the world (Amazon & Google) are trying to capitalize on that market share.

Google’s YouTube offering at a glance seems like it’s primed to capture a good portion of users looking for a cable alternative until you realize that you’re already a Netflix subscriber and a Prime member. And right after I finish writing this article, I’m going home to binge-watch Narcos.

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