YouTube has been one of the most popular video streaming platforms for the better part of the last 15 years, and since Google, now Alphabet Inc. (GOOG, Financial) (GOOGL, Financial), acquired it, it’s never been a major player in the company’s revenue mix. But things have changed over the last few years due to advances in technology.
The ability to stream YouTube videos via mobile phones is certainly one of the main factors behind YouTube’s march toward profitability. According to reports, YouTube generated net sales of about $4 billion (after paying content creators) two years ago; that figure was expected to top $7 billion last year.
The platform has also experienced an increase in quality content, partly due to a sharp decline in the price of gadgets and tools used to create online videos. These include cameras and computers as well as smartphones.
The same trend is reflected on other tools used in video production with most software ideally being offered free online. This means that setting up a video channel is now as easy as buying a camera while the rest of the stuff can be obtained from the internet at virtually no extra cost.
Once logged into YouTube, Vimeo, Facebook (FB, Financial) or one of the popular video streaming portals, you can barely spend a minute before seeing a live coverage of an event on your timeline. Some of these videos are high quality, and that tells you that the tools being used to produce them are as good.
In addition, some of the software used to produce these videos requires no technical know-how to get around the editing features. As long as you have basic video editing skills, you can easily produce high quality video on YouTube, Vimeo or Facebook by capitalizing on easy-to-use video editing software offered free online.
Such freeware services are good for YouTube because with quality video production tools being offered at no cost, more video content creators are able to come up with quality content for the video streaming service. And better-quality content means that users will be more likely to return for more content once they view their first video.
Furthermore, this also implies that with time, the mainstream media industry will be up for a challenge. Already, there are several TV channels that have already opened a YouTube Channel, and by doing this, they are bringing a huge chunk of their audience to the online streaming platform, which again is good for Alphabet. This is going to increase YouTube ad revenue, which will then push it close to making a significant contribution to Alphabet’s growth story.
Ad revenue relies on the number of views, and based on YouTube statistics, there seems to be an insatiable demand for video content. The average number of hours every person spends watching video on YouTube is up 60% from two years ago due to market penetration driven by mobile devices, and the platform has 300 hours of video content uploaded every minute.
These figures will continue to rise in the foreseeable future as more TV stations and media channels continue to launch their services on YouTube and other streaming platforms. In addition, with increased competition in the smartphone industry, powerful devices are now being sold at cheaper prices making them more affordable to those in developing countries. This should further boost video viewership on YouTube thereby making it a major player in Alphabet’s business model.
Conclusion
In summary, YouTube is the world’s largest video streaming service. Facebook has tried to disrupt its dominance, but it is yet to succeed. The shift toward online video streaming services is now being embraced by mainstream media, and this is a good thing for YouTube. But it also poses a few risks as no-ads premium video streaming services like Netflix (NFLX, Financial) and Amazon (AMZN, Financial) continue to attract a unique set of audience.
Disclosure: I have no position in any stock mentioned in this article.
