How YouTube became a TV powerhouse and how much ad revenue it makes

How YouTube became a TV powerhouse and how much ad revenue it makes
  • YouTube dominates streaming TV viewing, surpassing Netflix in 2023 viewership metrics.

  • Streaming now accounts for 39% of TV viewing time, with YouTube leading for 12 months.

  • Here's a breakdown of YouTube's rise to $8.1 billion in quarterly ad revenue.

People are catching on to the fact that YouTube is ruling TV.

Streaming is quickly replacing traditional TV, and the place people are spending much of their time watching streaming video is YouTube.

The Google-owned video platform dominated streaming TV viewing for all of 2023, ahead of Netflix, by one widely cited measurement. YouTube is increasingly becoming today's "must-see" TV for people, especially younger generations, with free videos uploaded by creators like MrBeast; free, ad-supported shows and movies from big Hollywood distributors like Disney, Warner Bros. Discovery, and Paramount; and live sports via YouTubeTV add-on, NFL Sunday Ticket,

It's also pitching itself as a one-stop entertainment shop with Primetime Channels, a 2-year-old service that lets users subscribe directly to streaming services like Showtime, Starz, and Paramount+ through YouTube.

YouTube is winning with advertisers because it can service everyone from local pizza shops to CPG giants like Procter & Gamble.

Here's a breakdown of YouTube's rise and what it means for other entertainment players competing for people's attention and the advertisers trying to reach them.

How big is YouTube's viewership and user base?

Any way you slice it, YouTube is enormous. It's the most used Android app after TikTok, with users averaging 28 hours a month, according to a widely cited data report from January 2024. It was estimated to have the biggest social-media advertising audience, with 2.5 billion users per month, as of that January report.

In streaming, which now accounts for nearly 39% of people's TV viewing time, YouTube has been winning hands down for some time now. YouTube dominated view time for 12 months in a row, according to Nielsen. In May, YouTube accounted for 9.7% of viewing time, ahead of Netflix's 7.9%.

With 500 hours of videos uploaded every minute, YouTube pitches itself as a place that serves every possible interest, from creator content to music, news, educational videos, and more.

The Gauge, which Nielsen launched in 2021, isn't a complete picture of TV viewing. It only measures viewership on TV sets, not mobile devices. It also only includes free YouTube, not YouTube TV, YouTube's fast-growing pay TV service. Based on paid subscriptions, Netflix still reigns, with about 270 million subscribers worldwide.

Meet the 33 people with the most power at YouTube, the world's biggest online video company

Looking at media consumption another way, Nielsen recently released its Media Distributor Gauge, which reflects total viewing by media distributors across broadcast, cable, and streaming. With those platforms included, YouTube takes second place in monthly TV viewing, behind linear giant Disney, which had an 11.5% share.

Still, there's no denying YouTube's enormous reach, which it has leveraged to become an advertising powerhouse.

YouTube quarterly revenue hit $8.1 billion, but some brands still shy away

YouTube's user-generated content continues to concern big brands that insist on major quality control. It doesn't seem to have discouraged them too much, however. YouTube had $8.1 billion in advertising revenue in the first quarter of 2024, up 20% over the year-ago quarter, while linear TV revenue is declining as audiences shift over to streaming.

Learn how YouTube faces challenges as rivals offer TV streaming scale for the first time

YouTube also benefited when the Hollywood strikes shut down TV productions, leading advertisers to look for alternatives to network TV.

Read about how YouTube is pitching Madison Ave for TV dollars

How YouTube became a TV giant

YouTube touts its revenue-sharing model to fund creator content as a key strength, saying that, unlike the traditional Hollywood studio model, it ensures that it continually produces hits. YouTube trumpeted that in the past three years, it paid out $70 billion to creators, artists, and media companies, which makes it a bigger spender on content than Netflix.

Read Business Insider's analysis of YouTube's domination of the living room

Along the way, it's launched products that promise a high-quality environment for advertisers, like YouTube Select, which lets advertisers run ads on the top 5% of its most popular programming. In 2023, YouTube reached a deal to make NFL's Sunday Ticket games an add-on for YouTube TV subscribers.

Read Business Insider's story about how YouTube has become one of the biggest pay-TV services in the US

YouTube's reach in entertainment stretches beyond TV viewing. In February, it announced that it hit 100 million subscribers to YouTube Premium and Music, including free trials. YouTube Premium is a $13.99 a month service that includes features like ad-free viewing, offline viewing, and YouTube Music (which is ad-free). YouTube Music is $10.99 a month. YouTube TV is a $72.99 a month bundle of TV channels.

See new data showing how YouTube's push into other entertainment services is beating Netflix in the fight to be a 'must-have' service

How YouTube works with creators

YouTube has lately been touting how much it pays out to creators. It says it now shares revenue with 25% of creators in its YouTube Partner Program through Shorts, its TikTok competitor. Those creators get 45% of the ad revenue generated (after an undisclosed amount goes to record labels) on those videos, which run 60 seconds or less; creators of long-form videos get 55% of the ad revenue.

Read more about how YouTube pays creators

YouTube emphasized that creators are making money from the platform in other ways. YouTube is also promoting gen AI tools that it's giving creators to boost their videos and music.

Learn how influencers get paid and make money on TikTok, Instagram, and YouTube

Young people prefer YouTube over Netflix and Disney+

A common knock on YouTube is that it's largely low value. Yet, tell that to younger people, who prefer to spend time with YouTube over entertainment stalwarts from Disney to Warner Bros. Discovery.

YouTube dominates in areas important to Gen Z (user-generated video) and not where it matters less (live sports).

New research from Deloitte shows members of Gen Z prefer to watch social video and livestreams (47%) about twice as much as TV shows (24%) and four times as much as movies (11%). Surveys also show similar patterns among Gen Alpha.

Those preferences could change as they age, but that would entail changing not just what they watch, but their preferred devices.

Explore why Gen Z's preference for YouTube is a problem for streamers like Netflix and Disney+

What YouTube's rise means for Netflix and other entertainment companies

YouTube's hold on young people suggests a brighter future for YouTube than Netflix and traditional media companies, whose businesses depend on subscriptions as well as advertising.

Deloitte found that Gen Zers were three times more likely to be influenced by ads on social media than streaming.

The survey found that people of all ages are questioning the value of streaming media, where subscription prices have been rising, and about half feel it's hard to find something to watch.

Legacy entertainment companies have come to treat YouTube as a distributor, acknowledging they can't very well ignore its enormous reach. But in doing so, they're playing on a platform whose rules they can't control.

Read how a new startup from 2 Twitch alums is trying to get Gen Z to watch TV

YouTube's dominance faces fresh challenges

YouTube's dominance has made it the target of critics. It's been accused of violating children's privacy. Critics have asked the government to probe Google and YouTube's dominance.

It also continues to face brand safety concerns by advertisers as well as increased competition now that all the major streamers have ad tiers. YouTube's user-generated content continues to concern big brands that insist on more quality control, while other streamers say they guarantee a low-risk environment for advertisers.

YouTube's reputation got renewed attention in June 2023 when advertising analytics company Adalytics shared research showing Google violated its standards when it ran advertisers' video ads on other websites. A subsequent Adalytics report alleged YouTube served ads that may have led to improper tracking of kids online. Google has disputed those reports.

Finally, many advertisers have become fed up with Google's dominance of the ad ecosystem (which is now under antitrust scrutiny) and have more options to spend their marketing budgets these days.

Read the original article on Business Insider