On April 23, 2015, Google (GOOG, Financial) YouTube, the prolific video-sharing giant, celebrated its 10th birthday. Little did the founders and initial viewers knew how the low-quality 18-second amateurish video featuring a young Jawed Karim with elephants in a Zoo would revolutionize the internet and catapult YouTube into the league of most popular web domains , third only to Owner Google Inc. and rival Facebook (FB, Financial). In this decade, YouTube has matured from strength to strength and completely dominated the online video segment with almost a third of internet users visiting the site daily and almost 300 hours of video uploads every hour. With the rising popularity of Facebook Video Ads, launched just last year and already enjoying a viewership of more than 4 billion videos every day, YouTube’s top slot is definitely threatened.
Players in the game
Facebook, the undisputed pioneer in social media, entered the online videos arena with Auto-play video Ads in March 14. After a year, the first quarter revenue of $3.54 billion with reported profits of 42 cents per share did not live up to the analysts’ expectations but the prominent rise in its monthly user base claimed to be larger than the population of China, which proved to be the silver lining. The share value dipped by 1.5% post the result declaration but Facebook sees it as a fine quarter owing to the better than expected count of Daily active users (DAU) standing at 936 million as of March 15th 2015, rising by 17% in the last year.
According to RBC Capital Markets analyst Mark Mahaney, "The Internet is experiencing something of an inflection point in terms of rising demand of video and mobile platform advertising, and FB may well be the single biggest beneficiary of this inflection." In spite of Facebook’s slowest quarterly revenue growth in two years, the encouraging progress in the monthly user base induced almost nine brokerages to boost the price targets on Facebook’s stock as all of them saw video advertising as one of Facebook's most promising areas for revenue multiplication. Mahaney raised his price target by a staggering $88.
From the online archive of homemade amateurish videos and illegal reproductions of popular TV shows, YouTube of today is an online phenomenon. Added to the exclusive portfolio of Google in 2006 for $1.7 billion, YouTube thrived under its parent company’s clout and reputation. Television companies, media moguls, celebrities and video enthusiasts are now guaranteed to upload and promote their content on this platform. Advertisers are eager to host their commercials in the classy high definition videos. YouTube is undoubtedly a game changer revelling in immense acceptance and social relevance, but many analysts question its commercial profitability. As Google does not declare YouTube’s individual earnings, the financial viability is speculated as questionable owing to anticipated video revenues of only $1.6 billion in the $150 billion rich American television sector.
Looking ahead
Exponential growth is being anticipated by Facebook in advertising revenue owing to the growing viewership of global videos on its online and mobile platforms. With marketers currently spending just 5% of their budgets on Facebook, there are clear opportunities for progression as the significance of video and mobile Ads catch on. Facebook CEO Mark Zuckerberg declared that good things are coming up in the near future with a hint of going after the mega giant Google. But YouTube is just 10years old and flourishing under the effective parentage of a powerful Enterprise. This game of online videos is on the brink of going viral.
