Google’s YouTube still an ‘upstart’ in TV world

YouTube is by far the world\'s most popular location for video streaming

Google Inc. spent a fair bit of time talking about YouTube during its business call last week. While the data provided paints a really upbeat picture, some questions remain unanswered.

Brian Wieser, a brand new York-based analyst at Pivotal Research Group, tried to fill in the blanks, starting with Google’s indication watch time on YouTube has risen 60 percent on an annual basis and mobile watch the years have more than doubled in the past year.

Since Google doesn’t allow third-party viewability services, investors need to put aside whether their definitions of watch time differ. We also know that Google hasn’t disclosed the number of hours viewers invest in YouTube globally.

Back in April 2013, however, the company did express it had six billion monthly viewing hours, a Half year-over-year gain. Assuming that growth rate of fifty to 60 per cent has continued, and six billion would be a typical month, Wieser estimates YouTube’s monthly hours of viewing would certainly be at 14 billion. That’s about 170 billion consumption hours on an annualized basis for 2015.

Next, he checked out how many internet users are watching YouTube. Since adoption of special broadband is likely a major driver of viewers on the video platform, the analyst assumed somewhere around the 73 per cent growth rate in global access to the internet also applies to YouTube’s unique users.

Based on YouTube’s viewer numbers first provided in March 2013, along with other more recent data, he assumes it\’s 1.75 billion unique monthly users. Lining that up with 170 billion hours of consumption means about 100 hours per YouTube consumer annually.

“That’s certainly a significant number if it\’s correct,” Wieser said, adding that YouTube wants to compare itself against TV.

ZenithOptimedia estimates that the average person globally watched 180 minutes of TV per day in 2014 C 7.7 trillion viewing hours C putting YouTube\’s 170 billion hours at 2.2 per cent of this figure.

So even when YouTube grows another Half this year and TV declines, the analyst noted it would still only are available in at a little about three per cent of the total.

“Even low single digit percentages of TV-equivalent consumption volumes, and no less on the global basis, is a significant feat for just about any relative-upstart media company to complete,” Wieser said. “However, most of YouTube isn\’t actually TV-equivalent, and in a multitude of locations where it might be (developing markets in particular), advertising markets and consumer- pay models are and can remain under-developed.”

In order for YouTube to become more of a TV-equivalent, it must invest more in what advertiser deem to become premium content. Alternately, it might continue to try to alter what is defined as “premium” to better match what it\’s supplying in a relatively low cost.

Wieser is confident YouTube will capture a portion of TV budgets from advertisers trying to extend their hands within specific audiences and those less worried about content quality. However, he believes that even using the optimistic stance that advertisers are willing to put their brands beside to a lesser extent produced content, investors must still acknowledge that YouTube is “more like an upstart cable network fighting for market share when its scale is defined in an appropriate context.”

Financial Post