An increasing number of viewers but disappointing advertising profits: according to eMarketer estimate, 7,8 billion dollars net income earned by Youtube in 2017 would account for just 8% of Google’s ones.
This is due to investors’ fear that their brands may be associated with inappropriate, i.e vulgar or violent, videos, but, especially, to the so called “long tail”. Such expression, created by Chris Anderson, indicates a model stemming from digital economy, according to which revenues are made selling a little of many things or a lot of just a few things. To quote Anderson’s words, << the era of one-size-fits-all is over, and it has been replaced by the market of multitudes >>. Basically, the mass market has turned into a mass of niche markets, where everyone can find what they want among a huge range of products.
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However, Youtube engineering excellence, which has turned it into the product, among Google’s creations, which is closer to a global social media which can fill – thanks to its registered users- Big G’s data mining gap, is now showing its limits from the financial point of view. YouTube income corresponds to a low margin compared to Google standards, with an average payment of 55% of the advertising budget which goes to content creators, adding up to video hosting and distribution costs.
According to what stated by the report issued by Enders Analysis “YouTube: thinking beyond the long tail”, it is about time they thought about overcoming the “long tail” effect, for instance, by becoming more flexible in their rapports with the advertising industry and by planning a more aggressive go-to-market strategy aimed at counterbalancing the competition of OTT, over-the-top contents which appear for a given amount of time on top of the web pages users want to display.
The stake is worth the effort. It is enough to think that YouTube boasts 1,5 billions of sole viewers, 1 billion of hours of daily views and 100 million hours spent by viewers on connected TV screens. In the UK, where YouTube is more famous than Facebook, the percentage of viewers watching Youtube videos on their TV sets is even higher: 15% of the total. In the UK over 50 million people watch YouTube for about 5 minutes a day and 10 million people reach up to 2 hours.
TV is consequently one of the possible answers to this problem. And YouTube has answered the pessimists who argued that the presence of traditional TV contents is discouraged by low adv rates and by the fragmentation of the audience, by announcing future great news. Investors can now count on new packages and tools to reach YouTube users who watch videos on their TV. Moreover, tools used for managing advertising campaigns, including DoubleClick Bid Manager and Google AdWords, will be integrated among TV sets specific features. Furthermore, YouTUbe TV channels, YouTube cable TV service, will be added to Google Preferred, an existing package of high return channels offered to brands for advertising (YouTube Is Moving Toward Traditional Television Audiences With Its Newest Announcement).
This way marketers will have both the most popular YouTube contents and the traditional TV contents in every single campaign, being allowed either to broadcast some ads only to a given targeted audience or to show everybody the same ad pm traditional TV.
Will this be enough? It is likely to be a good start.
What do you think about watching tv on YouTube? Tweet @agostinellialdo.
To find out more about the digital world, you may read my latest book: “People Are Media”
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