• YouTube Ad Revenue Hits $6.9 Billion in Q4 on Direct Response Ad Surge

    YouTube advertising revenue grew to $6.9 billion in Q4 ’20, up 46% from $4.7 billion in Q4 ’19. YouTube’s results were reported as part of parent company Alphabet’s Q4 ’20 and full year 2020 earnings released yesterday. YouTube’s ad revenue accounted for 15% of Google’s total ad revenue of $46.2 billion in Q4 ’20, up from 12.4% of Google’s total ad revenue of n Q4 ’19.

    Critical to YouTube’s ad growth is the macro trend of reduced linear TV viewing, especially among younger audiences. This makes it harder than ever for brands to reach these viewers, a tailwind that is helping all ad-supported streaming services.

    On the earnings call, Philipp Schindler, Alphabet’s SVP and chief business officer, said that YouTube now reaches “more 18-to-49 year olds than all linear TV networks combined.” He also said watch time is increasing and advertiser effectiveness is getting better and better. Having superior ad monetization relative to traditional TV means inevitably YouTube will pull more and more traditional TV ad spending onto its platform.

    Schindler said this kind of brand advertising on YouTube  was “hit hard” in the early stages of the pandemic, but “rebounded in Q3 and Q4.” But he noted that the Direct Response business is now “one of our largest and fastest-growing ad offerings on YouTube.” Schindler said it was “practically nonexistent three years ago.”

    YouTube revealed more details about its Direct Response ad formats last June. YouTube has added ways for advertisers to expose product choices and calls-to-action alongside the video ad itself. The idea is for the video ad to drive both branding/awareness and conversion, yielding a higher ROI for the advertiser. This full funnel approach is valuable to advertisers especially during the pandemic when budgets are being squeezed.

    Schindler said the number of active advertisers using TrueView for Action doubled in the first 6 months of 2020 and that 60% of them are new to YouTube. He highlighted L’Oreal and MasterClass as two advertisers who have used TrueView for Action to drive higher conversion.

    Schindler reiterated points made in prior earnings calls, that connected TVs are YouTube’s fastest-growing screen, with over 100 million viewers in the U.S. alone watching YouTube and YouTube TV on CTVs monthly.

    There was little new information disclosed about YouTube TV, which Google said had 3 million subscribers at the end of Q3 ’20. Schindler said “YouTube TV continues to gain momentum” and that “our advertising efforts on YouTube TV itself are still very, very early.” He added “we heard from customers, they have a very strong interest in advertising and streaming environments…so that’s an interesting path going forward.”

     
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