• Google is notorious for keeping analysts in the dark over how well (or not) YouTube is doing  
• This week it opened up its YouTube financials for the first time
• Analysts were thankful, but they wanted more detail

The industry has grasped over the past few years that YouTube was coining it. That wasn’t too hard to work out given the evidence available from the outside looking in, where you could gather things like the number of views, the volume of advertising and other metrics either announced by Google or deduced from what was already known via other means.

But media analysts have also long sought a better view of Youtube’s finances from the inside. Now for the first time, they have dollar numbers announced this week by parent Alphabet in an earnings report.  

As a result, observers estimate that this year, YouTube’s revenues could top $25 billion. That sounds like an impressive amount, but of course the ‘markets’ were expecting more - more money, yes of course; but more of the ‘transparency’ that would enable them to see how Youtube was trending against its competitors’ advertising and viewer numbers. Especially its new streaming competitors now including the big telcos. And Disney. 

When everything is dependent on huge viewing volumes and narrow margins, trends matter. And getting a measure  of how YouTube’s margins might be changing would be a good way of working out if, and by how much, YouTube is feeling pressure from the new streaming entrants.

There’s irony here

When Google first brought the UGC (User Generated Content) platform, as we all rather reductively called it back in 2006, industry experts were shaking their heads in disbelief. They saw it merely as a system on which kids could post cat videos, watch other people miming to pop songs and little else. Yes, they said,  it had ‘taken off’ but had done so without any viable monetisation mechanism and, furthermore, was clogging up the Internet. 

I remember us (at TelecomTV) being called upon to “do something on it” by pointing out to viewers how Youtube couldn’t possibly be making any money. It was all a big con.

Well it may not have been making money 12 or 13 years ago  (that’s the way disruptive network-based business models work) but not only is it making  big money now, but the internet video delivery (Over The Top or OTT) model it adopted (along with TelecomTV, of course)  is now the settled direction for the online video business. 

The big telco network operators, so keen to oppose ‘OTT’ in 2008 are all now leaping in. And there lies the ironic problem for Youtube which, one way or another, is likely to lose market and ad revenue share as new streaming services continue to hit the market with new business models and grab minds. 

The stand-out success story amongst the new streamers is Disney. It just reported its quarterly results which showed its overall  profit declining by 17 per cent and its revenue climbing by 36 per cent. The reason? The Disney+ streaming service has got off to a tremendous start. In less than three months it has garnered 28.6 million subscribers (there’s the revenue climb) but to service all those subscribers it’s been spending big on its streaming infrastructure (there’s the profit decline). 

Disney says that performance had  “exceeded even our greatest expectations.”

Partly in response to what it would have seen as a looming competitor in Disney and partly to appease Youtube’s content providers who had been disadvantaged by new requirements set by the US Federal Trade Commission (FTC) following YouTube’s breach of child privacy laws, YouTube had announced last year that it was ploughing $100 million into new childrens’ video content. That followed on from its $170 million settlement with the FTC and most recently YouTube has announced that it’s pulling out all the stops to play the good guy. 

According to Bloomberg (the media outfit, not the presidential hopeful) YouTube says it will spend that money to fund videos that “drive outcomes associated with the following character strengths”: courage, compassion, communication, gratitude, curiosity, humility, teamwork, integrity, perseverance, self-control, empathy and creativity. Many more words  - life skills, healthy habits, understanding of culture and diversity - followed. 

Sounds like YouTube is marketing its new programming to appeal to the parents rather than the children.