YouTube is now the biggest online video platform in the world with consistent growth during the last few quarters. If the growth revenues of YouTube continue, it will grow as big as that of Netflix by the year-end.
Google’s YouTube is on track to bring in growth revenues that are comparable to that of Netflix’s. And the biggest contributor it has seen is coming from the rise of advertisements that apparently were on television. And this is just like scratching the surface, as there are more potentials with commercial advertisers on YouTube.
Google’s chief business officer Phillip Schindler said that the growing trend of commercial advertisers is still in the early stage. There is so much room to grow with so many possibilities that are slowly unfolding.
Biggest income generators come from advertisements
In its first-quarter report last Tuesday, Google’s mother company Alphabet said that YouTube has contributed around $6.01 billion in revenues. And that revenues are mainly coming from the commercial advertising services, says Jennifer Elias of CNBC. Growing by around 50% from the same periods of the previous year of $4 billion revenues.
That surpasses the 46% growth during the fourth quarter of last year. It also doubles the growth rate of Netflix of around 24% revenue growth during the first quarter. And Netflix is anticipating its growth rate to go down to 19% by the second quarter.
If the trajectory of its growth continues, YouTube might bring in between $29 to $30 billion in revenues this year. Comparable to Netflix’s expectation of $29.7 billion revenues for 2021 say some analysts from Refinitiv.
Alphabet’s initial disclosure of YouTube’s advertising revenue was last February 2020. From then on, investors are giving attention to its growth potential boosted by the pandemic as more people stay home. YouTube was the leading video platform during the pandemic. A report by Pew said that YouTube’s video platform saw an increase in viewership from US adults. The viewership has increased from 73% during 2019 to 81% in 2021.
Netflix and YouTube have different business models
The two giant streaming services (Netflix and YouTube) have different business models. Netflix draws its revenues exclusively from the payments of its 207 million subscribers. YouTube, on the other hand, may have revenues coming in from the payment of its subscribers. But the biggest income generator for YouTube comes from advertisers who pay the company for putting advertisements into its platform.
While YouTube may only have a fraction of subscribers compared to Netflix. It prides itself on getting the biggest viewership in terms of hours of viewing. YouTube users watch around a billion hours of videos per day while Netflix gets around 400 million hours of viewership. Rich Greenfield from Lightshed Ventures has presented these numbers.
It is obvious that regardless of who ends up ahead between the two YouTube or Netflix. Both have taken the people’s attention and money from the traditional media TV. There has been a clear shift of viewership from traditional TV into the online video platform. And where the viewership is, the money usually follows. Traditional media TV companies need to step up otherwise they will continue to be left behind.