After 15 years of avoiding the YouTube ad revenue question, Google finally broke rank on Monday and spilled the beans.
YouTube is now one of the fastest growing areas of Google’s ad business.
According to parent company Alphabet’s fourth quarter earnings report, YouTube ended 2019 on a high, with advertising revenues of US$4.7 billion in the final quarter of 2019.
Representing a 31% year-on-year increase, driven by substantial growth in direct response advertising and continued growth in brand building, which remains YouTube’s most significant component.
On an annual basis, YouTube reached US$15 billion in ads revenues in 2019, growing at 36%, compared with 2018.
YouTube’s Growing But Search Dominates. For Now…
More than a decade after making Chad Hurley and Steve Chen overnight squillions, YouTube is now driving 11% of total ad revenues for Google.
Despite YouTube marketing investment accelerating, Google’s cash cow remains search engine marketing.
2019 Q4 Ad Revenue Results
- 72% share for Google Search and Other at $98.1 billion
- (includes Maps, Gmail, Play and Shopping)
- 16% share from Google Network Members’ properties at $21.6 billion
- (third-party publisher sites)
- 11% share for YouTube at $15.1 billion
That said, there are reasonable grounds to consider that search may have peaked, as represented by the well documented growth slowdown in Google’s core business.
At the same time, online marketing areas more geared around branding, such as social media, online video and native advertising, continue to accelerate.
Perhaps, explaining Google’s foray into such areas in recent times, with new native ad launches such as Google Discovery ads, announced mid last year. Not to mention, immersive AR (Augmented Reality) ads on YouTube and interactive, three-dimensional ads on the Google Display Network.
In fact, cynics might argue that Google *finally* released YouTube’s numbers to distract from its relatively underwhelming Q4 search performance.
But, what do cynics know.
YouTube Marketing Is Still Under-invested In
While YouTube marketing spend globally is growing handsomely, and will pick up the slack for Google in the coming years, it is still under-indexed by most.
According to Bloomberg, Instagram marketing investment in 2019 topped $20 billion. That despite being substantially smaller than YouTube.
To be fair, a not insignificant portion of Instagram marketing investment is probably accidental.
The majority of Facebook advertisers give Facebook free reign on ad placements, allowing Automatic Placements. Hence the random, creative mess, which is most Instagram Story ads, as Facebook auto-botches Facebook News Feed ad creative into Instagram Story ad placements.
Therefore, it might be worth taking Bloomberg's figures with a slight pinch of salt.
Still, the fact remains, that many marketers over-skew towards the Facebook empire, while neglecting YouTube. Or rather, just using YouTube as a dumping ground for old video content, and random pre-roll ads, instead of approaching more thoughtfully.
However, Facebook last year banked roughly US$70 billion in ad revenue, whereas YouTube banked US$15 billion.
Throw into the mix, that Facebook ads are predominantly driven by video units, and this discrepancy makes even less sense.
YouTube gobbles 37% of all downstream mobile internet traffic worldwide, as YouTubers sit glued to Office reruns, toy un-boxings and Microsoft Excel hacks.
Google’s video giant is far ahead of Facebook (including Instagram) and Snapchat when it comes to video consumption. In second and third place with 14.1% and 8.3%, respectively for mobile data usage.
YouTube sits only behind Netflix on total internet bandwidth consumption, as YouTubers chew through 11.4% of total internet data, compared to Netflix’s 15%.
YouTube is were people watch video on the internet (for free), yet it remains the poor relation when it comes to online video advertising.
After 15 years sitting in the shadow of search marketing, 2020 marks YouTube’s time to shine for both Google and marketers alike.