YouTube is now Google’s second biggest money earner. YouTube TrueView ad approach is a hit with consumers. This makes it difficult for any company to compete, as evidenced by Vessel’s failure. Even YouTube’s own ad-free subscription service Red is having a tough time competing against it.
Google’s strong Q3 results were in part due to the continued strong performance of YouTube. The company suggested it was the second highest money earning business, behind search. Revenue estimates for the video site are in the region of $10B a year. Part of the company’s success is the wide acceptance by viewers of the TrueView ad approach. Apparently, the ability to skip the ad after 8-10 seconds works for viewers, advertisers and Google.
Google and Facebook are dominating the digital ad space. In the last quarter both increased their overall share of the rapidly growing market.
Chapter 2: Vessel failed because it couldn’t compete with YouTube TrueView (8:25)
Vessel tried to establish a new exclusive window for YouTube content. It seemed like a very good idea. YouTube stars are unhappy with the ad splits they get from Google. Vessel provided a new revenue stream without disrupting delivery on YouTube. Consumers would get exclusive access to the video before the rest of YouTube population. However, Vessel was not able to get enough people paying $2.99 a month to stay in business. Clearly, most were happy waiting a couple of days and watching the new video for free, with the TrueView ads.
Chapter 3: YouTube Red has 1.5M paying subs (15:50)
YouTube Red is also struggling to grow. It has 1.5M paying subscribers after a year in market. The $9.99 a month service offers 3 primary benefits:
- Ad-free viewing
- Ability to download videos for offline viewing
- Access to the music subscription service
Perhaps it too is struggling against the TrueView viewer friendly experience. YouTube is investing in original content and will deliver 20 originals shows by the end of the year, available only inside Red. Perhaps that will have more success in attracting new subscribers.