24/7 Insights
- YouTube is growing slower than expected.
- It is a warning about demand for ad-supported content.
YouTube is growing slower than expected. Although it offers a video on demand (VOD) service, ads are still its primary source of revenue. YouTube’s quarterly revenue rose by only 13% yearly to $8.66 billion, but Wall Street expected better.
Ad-supported content is driving increasing revenue for Amazon.com Inc. (NASDAQ: AMZN) Prime and Netflix Inc. (NASDAQ: NFLX). Netflix recently announced that ad-supported customer revenue rose 34% sequentially in the quarter just announced. However, Netflix also noted that it was a small contributor to revenue: “The company said it is on track to achieve critical subscriber scale for advertisers in its ad-supported countries beginning in 2025, although advertising won’t be its primary growth driver this year or next.”
Another reason YouTube’s ad revenue may struggle is the growing number of streaming services competing for ad dollars. Hulu, Paramount+, and Max each have an ad-supported subscriber tier. Put another way, the ad streaming market is fragmented, the same way the subscriber part of the industry is.
YouTube is the largest streaming service based on viewership, according to Nielsen data. If its revenue growth slows, it is a warning to the industry. Ad-supported services may not be as vital as they seemed a few quarters after launch.
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